1. A moral hazard is best described as:

A tendency toward dishonesty that increases the likelihood of loss

A moral hazard arises from dishonesty or bad character that increases the chance or size of a loss.

2. A morale hazard refers to:

An attitude of carelessness or indifference because insurance exists

A morale hazard is an indifferent or careless attitude toward loss that arises because coverage is in place.

3. An insurance policy is a conditional contract because:

Certain conditions must be met before the insurer pays a claim

An insurance contract is conditional because both parties must satisfy specified conditions for benefits to be paid.

4. Choosing to self-insure or to accept a policy deductible is an example of risk:

Retention

Retaining part of a risk through self-insurance or a deductible is the risk management technique of retention.