Question:
Roy is applying for life insurance to protect the value of his sole proprietorship business for his wife and children in the event of his premature death. He has requested $2,000,000 of term insurance coverage. One of the questions on the insurance application form requires Roy to divulge to the agent the amount of net (after expenses and before taxes) income generated by his business. What is the main reason the insurer requires this information? Question options: To see if Roy is a good candidate for other products, such as an RRSP To see if Roy can afford the insurance premiums for whole life insurance over the long-term To determine if the amount of insurance being applied for is reasonable To determine Roy's truthfulness, by cross-checking against financial statements