What is the main purpose of an insurance contract's warranty?

The main purpose of an insurance contract's warranty is to ensure the truthfulness of key information affecting the policy. A warranty is a specific stipulation that certain facts, conditions, or assurances are guaranteed to be true by the policyholder. If a warranty is breached, the insurer typically has the right to deny a claim or cancel the policy, as it can significantly impact the risk assessment.

This serves the crucial role of establishing trust between the insurer and the insured, ensuring that both parties have a clear understanding of the terms based on accurate information. The inclusion of warranties in insurance contracts helps create a foundation for the underwriting process, enabling the insurer to evaluate risks accurately and price the policy appropriately based on the information provided. Thus, warranties hold significant importance in maintaining the integrity and purpose of the insurance agreement.