What is a key condition that must be maintained for a warranty in an insurance contract?

• A. Regular insurance policy renewals
• B. Functional fire alarms as an example
• C. Accurate reporting of past claims
• D. Payment of higher premiums

Answer: (B)

A key condition that must be maintained for a warranty in an insurance contract is the maintenance of specific standards or conditions that the insured has promised to uphold. In this context, functional fire alarms serve as a prime example of such warranties. When an insurance policy includes a warranty related to fire alarms, the insured is typically required to ensure that these alarms are operational as a condition of the coverage. If the warranty is not upheld—such as if the fire alarms are disabled or not in working order—the insurance company may have grounds to deny a claim or even void the policy.

Warranties in insurance contracts represent a commitment to certain operational or preventive measures that reduce risk. Therefore, maintaining functional fire alarms directly impacts the insurer's risk exposure and is crucial for upholding the terms of the insurance contract. This is significant as it reinforces the insured's obligation to adhere to these conditions to ensure coverage remains valid.