Morale hazard
Certified Financial Planner glossary · Certified Financial Planner
Definition
Carelessness arising from the knowledge that a loss will be indemnified.
Morale hazard in plain English
A homeowner stops cleaning gutters because "the policy will pay for water damage anyway," without actively plotting a claim. Morale hazard is carelessness arising from the knowledge that a loss will be indemnified. It is the shrug, not the scheme. Moral hazard emphasizes behavioral change tied to coverage incentives; morale hazard emphasizes indifference and sloppy risk control. Exam writers love swapping the two. Match the attitude: calculated shift versus casual neglect after coverage exists.
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