What is the purpose of the examination of insurability in life insurance?

The purpose of the examination of insurability in life insurance primarily revolves around evaluating risk and determining an individual's eligibility for coverage. This assessment is essential for insurers to understand the likelihood of a claim being made based on the applicant's health, lifestyle, and other personal factors. By gathering this information, insurers can make informed decisions about whether to approve an application, what level of coverage to offer, and at what premium rate.

This assessment not only helps in determining if the individual qualifies for a specific policy but also plays a critical role in setting appropriate coverage limits that align with the insured's health profile. Factors such as medical history, current health status, age, and activities that may pose risks are analyzed to ensure fair underwriting practices.

In contrast, examining the financial stability of the insurer relates to the overall organization rather than the individual's insurability. Establishing a policy's loan value and determining the premium cost, while related to the insurance process, are not the primary objectives of the insurability examination. The focus is squarely on risk assessment and eligibility for coverage, making the chosen answer aligned with the fundamental principles of life insurance underwriting.