Final answer:
A statement made by an applicant that he/she believes to be true is known as a representation. This term is used in legal contexts, such as during the negotiation of a contract, where the truthfulness of such statements can affect the validity of the agreement.
Step-by-step explanation:
The statement made by an applicant that he/she believes to be true is known as a representation. A representation in the context of insurance and other legal agreements is an assertion by an applicant that they believe is factually correct at the time they make it. It's a statement made during the negotiation process for a contract and is used to give the other party an understanding of a situation, but it's not a guarantee or warranty of what is being stated. The concept of representation is distinct from warranty, which is an assurance or promise that certain facts or conditions are truly as they are represented to be and must hold true for the duration of the policy. This is important to distinguish because a misrepresentation can lead to the nullification of a contract, while a breach of warranty might also have consequences on the contractual obligations.