Statements made by a prospective insured on an insurance application that are believed to be true are considered what?

In the context of insurance applications, statements made by a prospective insured that are believed to be true are classified as representations. These are assertions made by the applicant regarding facts or circumstances that they understand to be accurate at the time of making the application. The importance of representations lies in their role as the basis upon which the insurer assesses risk and decides whether to accept the application or issue the policy.

Representations differ from warranties, which are more formal promises that something is guaranteed to be true; if a warranty is not fulfilled, it can lead to the cancellation of the insurance contract regardless of whether the insurer suffered any harm. Misrepresentations, conversely, involve statements that are false and known to be so by the applicant, which can also lead to complications such as denial of claims or cancellation of the policy. Disclosures pertain to additional information the applicant provides, which may not necessarily fall under the category of belief but are more about revealing pertinent details.

Understanding that representations are based on an applicant's belief in their truthfulness helps clarify their importance in the underwriting process, as they reflect the applicant's understanding and good faith in providing accurate information to the insurer.