Which of the following would be a moral hazard?

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Study for the NYS Independent Auto Damage and Theft Appraisal Adjuster Exam. Explore multiple choice questions, hints, and detailed explanations. Prepare efficiently for your appraisal adjuster license exam!

Multiple Choice

Which of the following would be a moral hazard?

Explanation:
Moral hazard happens when having insurance changes how someone behaves, making them more likely to take risks or to cause a loss because losses are covered. Intentionally setting your car on fire fits this because the person is deliberately causing a loss to obtain a payout, which reflects a change in incentives created by insurance. In contrast, installing an alarm system or parking in a garage reduces the chance of a loss, and maintaining adequate insurance is prudent risk management, not increasing risk.

Moral hazard happens when having insurance changes how someone behaves, making them more likely to take risks or to cause a loss because losses are covered. Intentionally setting your car on fire fits this because the person is deliberately causing a loss to obtain a payout, which reflects a change in incentives created by insurance. In contrast, installing an alarm system or parking in a garage reduces the chance of a loss, and maintaining adequate insurance is prudent risk management, not increasing risk.

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