Suppose an insurance company decided to offer divorce insurance. Based on the concept of moral hazard, economists would expect

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Economists would expect mostly the couples with marital problems to purchase divorce insurance due to moral hazard. Moral hazard refers to the idea that individuals may take greater risks or engage in more risky behaviors because they are protected by insurance. In the case of divorce insurance, some couples may be more likely to engage in behaviors that increase the likelihood of divorce because they believe they are protected financially. Therefore, it is more likely that couples experiencing marital problems would purchase divorce insurance, while couples without problems may not see the need.

Suppose an Insurance Company Decided to Offer Divorce Insurance