A person in poor health trying to buy supplemental health insurance is an example of ________.

Question

Quizplus · Accepted Answer

Adverse selection is when individuals with a higher risk of needing insurance are more likely to purchase it. In this case, the individual in poor health has a higher likelihood of needing supplemental health insurance, making it an example of adverse selection. Moral hazard refers to the tendency for individuals to take more risks or be less cautious when they have insurance. A Texas hedge is a financial strategy and not related to health insurance. Actuarial error refers to mistakes made in the calculation of insurance premiums based on risk factors.

A Person in Poor Health Trying to Buy Supplemental Health