Question

Sara is the owner of a gift shop that was struggling to make enough money to cover its bills. Sara knew there were reports of robberies in the area but continued to leave the doors to the store unlocked after she would leave at night. Sara figured if her store was robbed she could collect the insurance money and pay off some debt. Sara's carelessness is an example of what type of hazard?

Option 1: Moral Hazard
Option 2: Physical Hazard
Option 3: Financial Hazard
Option 4: Operational Hazard

Answer 1

Sara's carelessness in leaving the store unlocked and relying on insurance money is an example of Moral Hazard.

Step-by-step explanation:

Sara's carelessness in leaving the doors to the store unlocked, despite the reports of robberies in the area and her intention to collect insurance money if her store was robbed, is an example of Moral Hazard. Moral hazard occurs when individuals engage in riskier behavior because they have insurance coverage or other forms of protection. In this case, Sara is taking a risk by leaving the store unlocked, assuming that insurance will cover any losses.