Connecticut Life Producer Practice exam

Which statement about representations in an insurance application is correct?

1. They must be recorded by the agent

2. They are always binding in court

3. They are statements believed to be true

4. They are the main factor in determining premiums

The correct answer is: They are statements believed to be true

The correct answer emphasizes that representations in an insurance application are statements that the applicant believes to be true at the time of the application. This reflects the nature of representations as they pertain to the applicant's knowledge and belief regarding their circumstances. These statements are not guaranteed to be true, but they are made in good faith and are based on the applicant's understanding of their situation. In the context of insurance, representations differ from warranties, which are promises that something is true and must be upheld. While representations may influence the insurer's decision to provide coverage, they are not guaranteed to be factually accurate, and they can still be challenged if proven false or misleading. The other options described do not accurately represent the nature of representations. For instance, the claim that they must be recorded by the agent doesn't capture the essence of what a representation is; rather, it's more a procedural aspect of how applications might be handled. The notion that they are always binding in court is inaccurate, as representations can be disputed based on their truthfulness when a claim is filed. Lastly, while representations can influence premiums, they are not the primary factor determining the cost; that role is more associated with the insurer's underwriting criteria and risk assessment.