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Question

Difficulty: MediumPerils and Hazards

Match each risk-related scenario below to the correct category of peril or hazard it represents.

  • A hurricane that completely destroys a coastal commercial restaurant.Peril
  • An employee faking a severe workplace back injury to collect ongoing disability benefits.Moral Hazard
  • A homeowner neglecting to repair a broken burglar alarm because they have comprehensive theft coverage.Morale Hazard
  • A commercial delivery truck operating with heavily worn brake pads.Physical Hazard

Answer

Hurricane matches with Peril; Faked injury matches with Moral Hazard; Neglecting the alarm matches with Morale Hazard; Worn brake pads matches with Physical Hazard.
The correct matches accurately map the definitions of risk concepts to their practical examples. A peril is the cause of loss (hurricane). A physical hazard is a tangible condition increasing risk (worn brakes). A moral hazard involves intentional dishonest acts (faked injury). A morale hazard involves indifference due to insurance coverage (neglecting the alarm).

Step-by-Step Solution

1
Analyze the hurricane scenario.
The hurricane is identified as the direct, active cause of the property loss.
A peril is defined as the specific cause of a loss.
2
Analyze the faked injury scenario.
The action involves a deliberate, dishonest attempt to defraud the insurer.
A moral hazard arises from the character defects or dishonest tendencies of the insured or claimant.
3
Analyze the broken burglar alarm scenario.
The homeowner demonstrates carelessness due to the financial security of having insurance.
A morale hazard is an attitude of indifference to loss created by the existence of insurance coverage.
4
Analyze the worn brake pads scenario.
The worn brakes represent a tangible, mechanical condition of the vehicle.
A physical hazard is a physical condition that increases the frequency or severity of a loss.

Key Concept

Distinguishing between Perils (causes of loss) and the three types of Hazards (conditions that increase the chance of loss: Physical, Moral, and Morale).
Estimated Time:1m 30s
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Topics

Perils and Hazards

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