Ted purchased a comprehensive insurance policy for his car. Which of the following is an example...

Ted purchased a comprehensive insurance policy for his car. Which of the following is an example of moral hazard?

	Because of his insurance coverage, Ted replaced his worn-out tires with Michelin tires.
	Because of his insurance coverage, Ted uses a designated driver for the nights he spends bar hopping.
	Because of his insurance coverage, Ted avoids driving when the roads are icy.
	Because of his insurance coverage, Ted no longer locks his car doors.

Expert Solution

Option D.

Moral hazard is said to occur when people Increase their exposure to risks because they are covered by insurance policies.

Here in this scenario when Ted purchases an insurance policy for his car he becomes more carefree and he no longer locks his car doors

This is because of the belief that he no longer has to bear the full cost of that risk.

Rahul Sunny answered 2 years ago

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