In the case of an insurance policy,________ occurs when the existence of insurance encourages the insured party to take risks that increase the likelihood of an insurance payoff.

Question

Quizplus · Accepted Answer

Moral hazard refers to the idea that individuals may take more risks when they have insurance because they are protected from the full cost of any losses that may occur. As a result, they may engage in riskier behaviors or make decisions that they would not otherwise make if they did not have insurance. This can lead to higher payouts by the insurance company, which can then lead to higher premiums for all policyholders.

In the Case of an Insurance Policy,________ Occurs When the Existence