Humber/Ontario Real Estate Course 3 Exam Practice

Which statement is correct regarding home insurance during a property purchase and handling insurance-related problems?

1. The fact that a buyer has just had a substantial insurance claim involving their existing house would have no impact on the premium charged for this purchase.

2. The property being purchased may have an outdated heating or electrical system that an insurer requires to be replaced prior as a condition of issuing a policy.

3. If an unconditional offer is accepted on May 1st and limited fire damage occurs before the June 30th closing, the agreement is automatically null and void.

4. If an elaborate, built-in bar was to remain with the property, but was arbitrarily removed by the seller prior to closing, the seller's insurance company would compensate the buyer for that loss.

5. Banks typically include insurance premium payments as part of the monthly mortgage payments.

6. Insurance policies automatically adjust premiums based on property value fluctuations.

The correct answer is: The property being purchased may have an outdated heating or electrical system that an insurer requires to be replaced prior as a condition of issuing a policy.

Option B is correct because it highlights the importance of the property's heating or electrical systems meeting the insurance company's requirements as a condition for issuing a policy during a property purchase. Outdated systems can pose a higher risk for potential hazards like fire, which can impact the insurer's willingness to provide coverage. Ensuring that these systems are up to date can help facilitate a smoother transaction and avoid any insurance-related problems. Regarding the other options: A is incorrect as a buyer's previous insurance claims can influence the premium charged for a new purchase. C is incorrect as limited fire damage occurring between offer acceptance and closing does not automatically nullify the agreement. D is incorrect because the seller's insurance company is not typically responsible for items removed by the seller before closing. E is incorrect because while banks may require insurance as part of the mortgage agreement, insurance premiums are usually paid separately. F is incorrect as insurance premiums are not automatically adjusted based on property value fluctuations.