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    Question

    It is a situation in which one party gets involved in a

    risky situation where the party knows that it is protected through insurance and the other party will incur the loss?
    A Moral Hazard Correct Answer Incorrect Answer
    B Forgery Correct Answer Incorrect Answer
    C Floating Policy Correct Answer Incorrect Answer
    D Endorsement Correct Answer Incorrect Answer
    E Binder Correct Answer Incorrect Answer

    Solution

    Moral hazard is a situation in which one party gets involved in a risky event knowing that it is protected against the risk and the other party will incur the cost.  It refers to behavioral changes that might occur and increase the risk of loss when a person knows that insurance will provide coverage. 

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