Pure Risk is the correct term describing exposure to unpreventable incidents that can lead to significant financial loss, such as injury or death. Moral hazard arises when insurance coverage leads to more risk-taking behavior. Pure Risk involves scenarios over which individuals have very little control.
The type of exposure best defined as a condition or situation for any exposure or financial loss presented to an individual or family by causes such as injury, disability, death, or sickness is Pure Risk. This category of risk involves situations over which an individual has little control, like natural disasters or massive unemployment, and typically cannot be predicted or avoided. Therefore, people seek ways to mitigate the consequences of such events, often through insurance.
Moral hazard, on the other hand, is associated with insurance and describes how insured individuals may behave more recklessly than they would without insurance, knowing they are protected from certain financial losses. This can lead to an imbalance in the insurance market, as those who are insured are less motivated to prevent the insured-against risks.
Pure Risk is the correct term that describes the type of exposure to unpreventable negative events that can result in financial loss due to injury, disability, death, or sickness.