Ted purchased a comprehensive insurance policy for his car. Which of the following is an example of moral hazard?
A) Because of his insurance coverage, Ted avoids driving when the roads are icy.
B) Because of his insurance coverage, Ted no longer locks his car doors.
C) Because of his insurance coverage, Ted uses a designated driver for the nights he spends bar hopping.
D) Because of his insurance coverage, Ted replaced his worn-out tires with Michelin tires.

Question

Quizplus · Accepted Answer

Moral hazard occurs when an individual takes more risks because they are protected from the consequences, such as not locking car doors due to having insurance coverage.

Ted Purchased a Comprehensive Insurance Policy for His Car