Property and Casualty Insurance Basics Practice Test 2025 – The All-in-One Guide to Mastering Your Exam!

Morale hazard refers to a type of risk that arises from an insured party's irresponsibility or lack of concern for their property, which can lead to increased likelihood of a loss occurring. This behavior is characterized by carelessness because the individual assumes that losses or damages will be covered by insurance, leading to less caution in managing their assets. For example, a property owner may neglect necessary maintenance or leave valuables unsecured because they feel protected by their insurance coverage.

The other options focus on different aspects of risk and behavior. Intentional damage by the insured falls under the category of moral hazard, which involves deliberate actions for personal gain, whereas morale hazard is not intentional. Deliberate fraud for financial gain also represents a form of moral hazard, as it involves deceitful actions with a clear profitable intent. Reckless driving leading to accidents showcases risky behavior, but it is fundamentally about the consequences of actions rather than an attitude of carelessness towards property protection. Therefore, the correct description of morale hazard aligns most closely with the behavior characterized by a lack of concern for property.