Registered Insurance Brokers of Ontario (RIBO) Practice Exam

In which situation would the insurer pay nothing after a building is sold but destroyed by fire shortly after the sale?

1. If the fire was accidental

2. If the broker was informed of the sale

3. If the owner did not transfer the insurance

4. If the insurance was still active

The correct answer is: If the owner did not transfer the insurance

The correct response focuses on the insurance obligations tied to ownership. In real estate transactions, the insurance coverage typically follows the property and is linked to the owner of the building at the time of the loss. If the owner did not formally transfer the insurance policy to the new owner during the sale, then the insurance coverage would still be in the name of the previous owner. In such a case, if the building were to be destroyed by fire shortly after transfer, the insurer would have no obligation to pay for damages since the new owner was not listed on the policy and thus not covered at the time the loss occurred. This situation illustrates the importance of ensuring that all parties involved in a sale are aware of their responsibilities related to insurance. It underscores the necessity for sellers to transfer the insurance policy to new owners or for them to obtain their own coverage promptly after the sale. The other answer options do not hold the same weight in this scenario because, regardless of whether the fire was accidental, the broker was informed, or the insurance was still active, the key factor remains the ownership of the insurance policy, which resides with the seller if not transferred appropriately.