Insurance Fraud Awareness Complete Practice Test 2025

The agreement to employ a watchperson as a condition for the issuance of a crime policy is an example of a warranty. In insurance terms, a warranty refers to a specific promise or guarantee made by the insured regarding certain facts or conditions related to the policy. In this case, having a watchperson on the premises at night is a condition that the insurer requires to mitigate risk and reduce the potential for loss due to crime.

When this warranty is included in the insurance policy, it implies that the insured must uphold this condition throughout the policy term. If the insured fails to comply with this warranty, the insurance company may have grounds to deny a claim related to the coverage provided under that policy.

This differs from aspects such as contracts, which refer to the overall agreement between the insured and the insurer, or exclusions, which detail what is not covered under a policy. Warranties establish particular obligations that the insured must adhere to for the policy to remain valid, highlighting the importance of fulfilling such conditions for coverage to be effective.