Hazard in Insurance, Types of hazards in Insurance, Physical Hazards In Insurance, Moral Hazards in Insurance, the example of hazard in insurance, meaning of hazard in insurance
Hazards in Insurance and Types of Hazards in Insurance
In simple words, Hazard is a condition that increases the chances of loss. It is something that accelerates the peril.
Hazards are classified into two categories-
1- Physical Hazard
2- Moral Hazard
1- Physical Hazards in Insurance:- Physical Hazard refers to the characteristics and qualities of the subject matter which is proposed to be insured.
For example- Petrol is more hazardous than edible oil for fire peril.
2- Moral Hazards in Insurance:- Moral Hazards refer to the character of the person who is approaching the insurance company for insurance.
If a person's intentions are malafide ( i.e. person wants to cheat the insurers or wants to make a profit from insurance ), then the moral hazard is high. Moral hazard can also increase because of carelessness on the part of individuals. This is referred to as a morale hazard.
Morale hazard increases the possibility of a loss that results from the insured person not taking due care about losses and taking fewer precautions.
For example- A person taking life insurance by fraudulently suppressing the fact that he is suffering from a critical/terminal illness.
