Certified Financial Consultant (CFC) Practice Exam

Which of the following is NOT a type of hazard in insurance?

1. Morale

2. Exposure

3. Physical

4. Moral

The correct answer is: Exposure

In the context of insurance, hazards refer to conditions or situations that increase the likelihood of a loss. These are categorized into specific types: moral, morale, and physical hazards. Moral hazards arise from the behavior or activities of the insured that increase the risk of loss, often due to the presence of insurance. For instance, if an insured individual feels less cautious about safeguarding their property because they have insurance coverage, this can be seen as a moral hazard. Morale hazards, on the other hand, relate to a state of mind or attitude that affects risk-taking behavior. This form of hazard may include negligence or lack of concern for safety, stemming from the assumption that insurance will cover any losses. Physical hazards are tangible factors that can lead to a loss, such as faulty wiring in a building or a slippery floor. These are concrete, observable risks associated with the property or individual. The term 'exposure,' while related to risk assessment and management in insurance, does not categorize a type of hazard. Instead, exposure refers to the presence of risk within an insurance policy, indicating the potential for loss based on the insured's circumstances. Hence, it is not classified as a specific type of hazard in insurance, making it the correct answer to the question.