Humber/Ontario Real Estate Course 3 Exam Practice

Which statement about the impact of inaccurate property information on insurance premiums is correct?

1. Higher premiums will be charged for newer properties regardless of size.

2. Older properties with recent renovations might be considered high-risk.

3. The age of the homeowner can influence the insurance premium.

4. If a homeowner provides incorrect information about the size of the property, the premium could be significantly higher when corrected.

5. If the homeowner's credit score is poor, the insurance premium might decrease.

6. Having previous insurance claims typically lowers the premium for a new property.

The correct answer is: If a homeowner provides incorrect information about the size of the property, the premium could be significantly higher when corrected.

The statement that if a homeowner provides incorrect information about the size of the property, the premium could be significantly higher when corrected is accurate because insurance companies calculate premiums based on various factors, including the property size. If the insured value is based on incorrect information, the insurance company may initially charge a lower premium. However, upon correcting the size of the property, the risk profile changes, potentially leading to a recalibration of the premium to reflect the true value of the property. Furthermore, accurate property information is crucial for insurance assessments as it helps evaluate the potential risk associated with insuring that property. If the actual size is larger than initially reported, this could indicate a higher potential cost for the insurer in the event of a claim, thus justifying a higher premium. This principle applies across different property characteristics like age, condition, and renovations, which all contribute to an insurer's overall risk assessment and premium determination.