Editor’s note: Insurance Questions answers questions about insurance coverage for equipment rental businesses. Email your insurance questions to firstname.lastname@example.org. Answers are provided by ARA Insurance, Kansas City, Mo. For more information, call 800-821-6580 or visit ARAinsure.com.
Q: Why could a warranty in an insurance policy be a bad thing?
A. When you buy a car, you usually want a warranty, but not necessarily so in an insurance policy. A warranty on an insurance policy means that you, as the policyholder, are warranting that some protection is in place or that you promise to perform in a certain manner. If a protective device is not operable or if you do not perform as required by the policy, the claim can be denied by the insurance company. A warranty may not be labeled “warranty” and it may appear in the main coverage form or it may be included in an endorsement. Policy wording may simply state that you are required to, for example:
If you or one of your employees fails to meet your obligation under the warranty, your claim can be denied. This could be devastating, so beware.
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