Humber/Ontario Real Estate Course 4 Exam Practice

In assessing fire coverage for an older home, which characteristic would likely be a significant concern for an insurance company?

1. The home has 100 amp service.

2. The electrical main disconnect is separate from the distribution panel.

3. The home has knob-and-tube wiring.

4. The home has a 10-circuit distribution panel.

5. The home has upgraded insulation.

6. The home is located near a fire hydrant.

The correct answer is: The home has knob-and-tube wiring.

Knob-and-tube wiring is a significant concern for insurance companies when assessing fire coverage for older homes due to its inherent safety risks. This type of wiring, commonly used in homes built before the 1940s, is often seen as outdated and potentially hazardous. It was designed for different electrical loads that are much lower than those typically present in modern homes. As such, knob-and-tube systems can pose higher risks of overheating and electrical fires, particularly if they have been modified or if additional loads have been placed on them without corresponding upgrades to the electrical system. Insurance companies tend to scrutinize homes with knob-and-tube wiring because they may involve higher liability and claims due to fire risk. Consequently, homes with this type of wiring might face higher premiums or even difficulty obtaining coverage altogether, as insurers look to minimize their risk exposure. In contrast, the other characteristics listed, though they may have implications for safety or efficiency, do not carry the same inherent risks associated with electrical safety as knob-and-tube wiring does. For example, having 100 amp service or a 10-circuit distribution panel is generally seen as adequate for modern electrical needs, and upgraded insulation or proximity to a fire hydrant are more related to energy efficiency and fire response rather