What is a warranty in the context of insurance?

In the context of insurance, a warranty refers to an ongoing assurance made by one party to another that certain facts are true. This element is significant because it establishes specific factual conditions that must be maintained throughout the duration of the insurance contract. If these factual conditions are not met, the insurer may have grounds to deny a claim or rescind the policy.

Warranties are distinct within the insurance realm as they typically involve aspects of the insured party's risk profile or behavior that can affect underwriting decisions and the policy's terms. For example, a warranty might be a statement that the insured property will be used solely for residential purposes, and any change could potentially void the coverage.

Utilizing warranties helps insurers manage risk more effectively by assuring them that the insured maintains certain agreed-upon conditions, thereby protecting both parties' interests throughout the policy term. This understanding is crucial for public adjusters, as they navigate claims and can better advise clients of their policy obligations.