How do representations differ from warranties in insurance?

The distinction between representations and warranties in insurance is fundamental to understanding the obligations and responsibilities of parties involved in a contract.

Warranties are statements or assurances that something is true, and they must be absolutely true at the time the contract is formed. When a warranty is included in an insurance policy, it creates an enforceable promise that the insured party must abide by. If a warranty is discovered to be untrue, even if the misrepresentation was unintentional, it could allow the insurer to deny a claim or cancel the policy. This highlights the stringent nature of warranties.

On the other hand, representations are statements made to the best of one's knowledge, but they do not have the same absolute truth requirement that warranties do. The purpose of representations is to provide information that helps the insurer assess risk, but they allow for some leeway regarding truthfulness, contingent on the belief and careful consideration of the person making the representation.

Thus, the correct answer is that warranties are statements that must be absolutely true. This characteristic sets warranties apart from representations, which primarily rely on the intent and knowledge of the individual making the statement without the necessity of strict truthfulness.