Humber/Ontario Real Estate Course 4 Exam Practice

Which buyer action could result in a significantly higher insurance premium than initially quoted?

1. Buyer states inaccurate square footage for the home being purchased

2. Extending credit limits before purchasing a home

3. Low personal credit score

4. Multiple recent insurance claims

5. Not maintaining a good credit score

6. Financing through multiple banks

The correct answer is: Buyer states inaccurate square footage for the home being purchased

When a buyer states inaccurate square footage for the home being purchased, this can lead to a significantly higher insurance premium than initially quoted due to how property size impacts insurance risk assessment. Insurance companies often consider the size of a home in their underwriting process, as larger homes typically involve higher replacement costs and potential liabilities. If the buyer's representation of the square footage is inaccurate, this discrepancy may result in the insurer recalibrating the risk associated with underwriting that particular policy, leading to an adjustment in the premium. While other factors, such as personal credit scores and claims history, can influence insurance premiums, the immediate effect of providing incorrect information about square footage has a direct correlation to the property being insured and the overall assessed risk, which is likely why it stands out as a significant concern for insurers.