General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
An applicant for health insurance has poorly controlled diabetes and works in a lead foundry. For risk classification, these facts are best described as:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Physical hazards are tangible conditions that increase the chance of loss. Poorly controlled diabetes and work in a lead foundry are concrete, objective facts that raise the probability of illness or injury. Physical hazards can be identified, measured, and priced by underwriters. They are distinct from moral hazards, which involve dishonesty, and morale hazards, which involve carelessness, and they are not a type of risk such as a speculative risk, which involves a chance of gain.
Why the other options are wrong
- B) A moral hazard involves dishonesty or fraud; nothing in the scenario suggests deliberate misrepresentation.
- C) A morale hazard is indifference or carelessness, not an objective physical condition.
- D) A speculative risk involves a chance of gain; these items are hazard classifications, not risk types.
Memory hook
Physical hazards are the facts about the body and the job.