(Solved):Which type of insurance coverage would most likely cause more problems resulting from moral hazard? Explain. a) Indemnity payments of $10,000 for each eye or limb lost or b) Indemnity payments of $… View Answer…

 

Question

Which type of insurance coverage would most likely cause more problems resulting from moral hazard? Explain.

a) Indemnity payments of $10,000 for each eye or limb lost or

b) Indemnity payments of $50 for each day spent in a nursing home.

 

EXPERT ANSWER

  • b) Indemnity payments of $50 for each day spent in a nursing home.

Among options a) and b) the insurance coverage likely to be affected by the concept of moral hazard is

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