What type of hazard might arise from carelessness or negligence?

Morale hazard refers specifically to the increased risk of loss resulting from carelessness or negligence by an individual or entity that is insured. When someone becomes less vigilant about safety measures or proper behavior because they have insurance coverage, this can lead to a heightened chance of accidents or losses. For instance, a driver who is overly casual about traffic rules because they believe their insurance will cover any potential damages demonstrates morale hazard.

Moral hazard, on the other hand, relates to changes in behavior due to the existence of insurance that may lead a person to act fraudulent or unethically. Physical hazard pertains to tangible conditions or situations that increase the likelihood of a loss, such as poor building construction or unsafe working conditions. Speculative hazard involves situations that have a chance of gain or loss and usually ties into investments rather than insurance. Hence, morale hazard accurately captures the essence of risk arising from careless behavior due to the presence of insurance coverage.