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Peril: cause of a loss

Hazard: increases the chance of a loss

Moral Hazard: tendancy for an individual to take risks because the party taking the risk won't feel the cost of the loss

Morale Hazard: indifference of an insured person to a loss because of insurance

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What is the difference between morale hazard and moral hazard?

In short, Moral hazard is a hazard dealing with the difference between right and wrong while a moral hazards is a hazard dealing with people's attitudes. At length, in the world of insurance, conditions that increase the frequency and severity of a loss are considered hazards. For example, placing a magazine rack beside your fireplace is a hazard. It heightens the chance of a fire to your house. There are four hazard categories according to the CPCU study of Risk Management and Insurance. They are Moral, Morale, Physical and Legal. Examples - Moral hazard - conditions resulting from a weakness of human character (when someone should know the difference between right and wrong), such as embezzlement. Morale hazard - conditions resulting from a person's indifferent attitude toward a loss when a property of exposure is insured, such as failing to lock the doors or roll up the windows of your car or leaving valuables in plain sight in your car . . .especially during the holiday season.


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