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QUESTION CARD Q004 · FOUNDATIONS & CONTRACTS

Moral Hazard

Understand the answer, compare the alternatives, and review the related terms.

CARD Q004

An applicant deliberately invents medical expenses to collect benefits. Which hazard does this illustrate?

  1. Morale hazard
  2. Occupational hazard
  3. Moral hazard
  4. Physical hazard
CORRECT ANSWER · C

Moral hazard

Moral hazard involves dishonesty. Morale hazard involves carelessness or indifference to loss.

Why each choice is right or wrong

A. Morale hazard

Incorrect. Morale hazard is carelessness or indifference; the applicant is deliberately dishonest.

B. Occupational hazard

Incorrect. The scenario does not identify an occupational exposure.

C. Moral hazard

Correct. Moral hazard involves dishonesty. Morale hazard involves carelessness or indifference to loss.

D. Physical hazard

Incorrect. A physical hazard is a tangible condition rather than fabricated expenses.

Review the related terms

Use these lessons to revisit the concepts and try additional practice questions.

Sources & further reading