Humber/Ontario Real Estate Course 4 Exam Practice

How are insurance responsibilities typically handled in a real estate transaction?

1. The buyer purchases new insurance policy after closing

2. The buyer takes over the seller's insurance policy

3. The existing policy is canceled on closing

4. The insurance is transferred upon completion

5. The insurance is adjusted monthly

6. The seller refunds partially used premiums

The correct answer is: The insurance is transferred upon completion

In a real estate transaction, the insurance responsibilities are typically handled by transferring the existing insurance policy upon completion of the sale. This transfer ensures that the property is protected under the same coverage that was previously in place while safeguarding the interests of both the buyer and the seller. When ownership changes hands, aspects such as liability and property damage protection must be maintained seamlessly to prevent any gaps in coverage. Transferring the insurance upon completion means the buyer will continue with the existing coverage, which can help avoid the delays and added complexities associated with securing new insurance policies immediately after the transaction closes. Other options do not accurately reflect standard practices in real estate insurance obligations. For instance, purchasing new insurance after closing could lead to a period without coverage which is risky. Taking over the seller's policy may not always be permissible without the insurer's consent, and canceling a policy at closing would leave a gap in coverage which is not advisable. Monthly adjustments or partial refunds of premiums also do not typically occur in these transactions, as the agreed-upon terms in the sale often cover responsibilities related to insurance directly.