Which hazard results from careless or irresponsible actions, such as leaving keys in a car?

• A. Physical Hazard
• B. Exposure
• C. Morale Hazard
• D. Adverse selection

Answer: (C)

Morale hazard is when the insured’s careless or indifferent behavior increases the likelihood of a loss. Leaving keys in a car shows a casual attitude toward security, which makes theft or vandalism more probable. This kind of risk comes from the insured’s conduct, not from a physical condition of the car.

Physical hazard would involve a physical condition that raises risk (like icy streets or faulty brakes). Adverse selection concerns the tendency for higher-risk individuals to seek insurance, and exposure refers to the amount of risk the insurer faces. So the behavior described best fits morale hazard.