In an Ad for Insurance, the Text Reads "Life's an Adventure

question 162

Multiple Choice

In an ad for insurance, the text reads "Life's an adventure, and there are plenty of perils awaiting your jewelry: a lost or broken stone, theft, accidental loss, damage, mysterious disappearance Have you thought about insurance?" How does the inclusion of accidental loss and mysterious disappearance create moral hazard?

• A) Individuals who purchase insurance are risk averse.
• B) Those who seek this jewelry insurance know that tend to lose their jewelry often.
• C) Once insured, some individuals wear their jewelry swimming, exercising, etc. where there is an increased risk of loss.
• D) Individuals who own jewelry know more about their risk than insurance company.

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Definitions:

Rescission

The cancellation of a contract to return the parties to their positions before the contract was made.

Opinion

A belief or judgment formed about something, not necessarily based on fact or knowledge.

Misrepresentation

A false statement of fact made by one party to another, which has the effect of inducing that party into a contract.

Exaggerated Claim

A statement or claim that exceeds the truth or reality, usually made to deceive or mislead.