Ms. Rodriguez, a 70-year-old resident of Manitoba, sells her manufacturing business for $5 million to an unrelated third party. She provides vendor financing for $1 million, payable over 10 years. Ms. Rodriguez wishes to ensure that if the buyer passes away prematurely, the remaining financing payments are guaranteed. Which of the following best describes the insurable interest she would require to purchase a policy on the life of the buyer?

Question: Ms. Rodriguez, a 70-year-old resident of Manitoba, sells her manufacturing business for $5 million to an unrelated third party. She provides vendor financing for $1 million, payable over 10 years. Ms. Rodriguez wishes to ensure that if the buyer passes away prematurely, the remaining financing payments are guaranteed. Which of the following best describes the insurable interest she would require to purchase a policy on the life of the buyer?

Answer options: ✅ A financial loss directly related to the buyer's death, such as outstanding debt.

• A familial relationship to the buyer, such as being a spouse or child.
• A philanthropic interest in the buyer's ongoing business success.
• A personal friendship that has spanned many years.

Correct answer: A financial loss directly related to the buyer's death, such as outstanding debt.

Explanation: Insurable interest exists when one person has a reasonable expectation of suffering a financial loss if the insured event occurs to another person. In this case, Ms. Rodriguez would suffer a financial loss if the buyer dies and cannot repay the vendor financing.