Alabama Property and Casualty Practice Exam

An incorrect statement made intentionally on a person's auto insurance application is classified as what?

1. Fraud

2. Warranty

3. Misrepresentation

4. Concealment

The correct answer is: Misrepresentation

The term used for an incorrect statement made intentionally on a person's auto insurance application is misrepresentation. Misrepresentation refers to providing false information with the intention of misleading the insurer. In the context of an insurance application, this can occur when an applicant knowingly provides inaccurate details regarding their driving history, previous claims, or other relevant factors that can influence the underwriting decision. Understanding this is crucial because misrepresentation can significantly affect the insurance contract's validity. Insurers rely on the accuracy of the information provided to assess risk and determine appropriate premiums. If misrepresentation is discovered, it may lead to the denial of claims or even cancellation of the policy. The other options, while related to the topic of insurance and risk, do not precisely capture the essence of intentionally providing false information in an application. Fraud typically encompasses a broader range of deceptive practices that may involve criminal intent. A warranty in insurance terms refers to a promise made by the insured regarding certain facts or conditions, while concealment involves withholding information rather than affirmatively providing false information. Thus, the classification of an intentional incorrect statement on an insurance application aligns specifically with misrepresentation.