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Definition: Moral hazard is a situation in which one party gets involved in a risky event knowing that it is protected against the risk and the other party will incur the cost. It arises when both the parties have incomplete information about each other. Description: In a financial market, there is a risk that the borrower might engage in activities that are undesirable from the lender's point of view because they make him less likely to pay back a loan. It occurs when the borrower knows that someone else will pay for the mistake he makes. This in turn gives him the incentive to act in a riskier way. This economic concept is known as moral hazard. Example: You have not insured your house from any future damages. It implies that a loss will be completely borne by you at the time of a mishappening like fire or burglary. Hence you will show extra care and attentiveness. You will install high tech burglar alarms and hire watchmen to avoid any unforeseen event. But if your house is insured for its full value, then if anything happens you do not really lose anything. Therefore, you have less incentive to protect against any mishappening. In this case, the insurance firm bears the losses and the problem of moral hazard arises.
Related Newsanxiety Life is filled with uncertainty and worries about the future. While many things remain outside your control, your mindset is key to coping with difficult circumstances and confidently facing the unknown. The role of uncertainty in lifeUncertainty is all around us, never more so than today. Whether it concerns a global pandemic, the economy, or your finances, health, and relationships, much of what lies ahead in life remains uncertain. Yet as human beings, we crave security. We want to feel safe and have a sense of control over our lives and well-being. Fear and uncertainty can leave you feeling stressed, anxious, and powerless over the direction of your life. It can drain you emotionally and trap you in a downward spiral of endless “what-ifs” and worst-case scenarios about what tomorrow may bring. We’re all different in how much uncertainty we can tolerate in life. Some people seem to enjoy taking risks and living unpredictable lives, while others find the randomness of life deeply distressing. But all of us have a limit. If you feel overwhelmed by uncertainty and worry, it’s important to know that you’re not alone; many of us are in the same boat. It’s also important to realize that no matter how helpless and hopeless you feel, there are steps you can take to better deal with uncontrollable circumstances, alleviate your anxiety, and face the unknown with more confidence. Affordable Online Therapy Get professional help from BetterHelp’s network of licensed therapists. HelpGuide is reader supported. We may receive a commission if you sign up for BetterHelp through the provided link. Learn more. Learning to cope with uncertaintyWhile we may not wish to acknowledge it, uncertainty is a natural and unavoidable part of life. Very little about our lives is constant or totally certain, and while we have control over many things, we can’t control everything that happens to us. As the coronavirus pandemic demonstrated, life can change very quickly and very unpredictably. One day things may be just fine, the next you’ve suddenly become sick, lost your job, or found yourself struggling to put food on the table or provide for your family. To cope with all this uncertainty, many of us use worrying as a tool for trying to predict the future and avoid nasty surprises. Worrying can make it seem like you have some control over uncertain circumstances. You may believe that it will help you find a solution to your problems or prepare you for the worst. Maybe if you just agonize over a problem long enough, just think through every possibility, or read every opinion online, you’ll find a solution and be able to control the outcome. Unfortunately, none of this works. Chronic worrying can’t give you more control over uncontrollable events; it just robs you of enjoyment in the present, saps your energy, and keeps you up at night. But there are healthier ways to cope with uncertainty—and that begins with adjusting your mindset. [Read: How to Stop Worrying] The following tips can help you to:
Tip 1: Take action over the things you can controlMuch about life is uncertain at the moment—and many things remain outside of your control. But while you can’t control the spread of a virus, the recovery of the economy, or whether you’ll have a pay check next week, you’re not totally powerless. Whatever your fears or personal circumstances, instead of worrying about the uncontrollable, try to refocus your mind on taking action over the aspects that are within your control. For example, if you’ve lost your job or income during this difficult time, you still have control over how much energy you put into searching online for work, sending out resumes, or networking with your contacts. Similarly, if you’re worried about your health or a recent diagnosis, for example, you can still take action by lowering your stress levels, reaching out to loved ones for support, and managing your symptoms. By focusing on the aspects of a problem that you can control in this way, you’ll switch from ineffective worrying and ruminating into active problem-solving. Of course, all circumstances are different and you may find that in some situations all you can control is your attitude and emotional response. [Read: Coping with a Life-Threatening Illness or Serious Health Event] Actively deal with your emotionsWhen circumstances are out of your control, it’s easy to become overwhelmed by fear and negative emotions. You may think that bottling up how you feel, trying to put on a brave face, or forcing yourself to be positive will provide the best outcome. But denying or suppressing your emotions will only increase stress and anxiety and make you more vulnerable to depression or burnout. When you can do nothing else about a situation, you can still actively face up to your emotions—even the most negative and fearful ones. Allowing yourself to experience uncertainty in this way can help you reduce stress, better come to terms with your circumstances, and find a sense of peace as you deal with challenges. Tip 2: Challenge your need for certaintyWhile uncertainty and change are inescapable parts of life, we often adopt behaviors to try to cope with the discomfort they can bring. In addition to worrying through every possible scenario, you may: Excessively seek reassurance from others. You repeatedly ask friends or loved ones if you’re making the right decision, endlessly research information online, or seek out expert advice in an effort to remove uncertainty from your life. Micromanage people. You refuse to delegate tasks to others, either at work or home. You may even try to force people around you to change, to make their behavior more predictable for you. Procrastinate. By not making decisions, you hope to avoid the uncertainty that inevitably follows. You’ll find ways to delay or postpone acting—or even avoid certain situations all together—in an attempt to prevent bad things from happening. Repeatedly check things. You call or text your family, friends, or kids again and again to make sure they’re safe. You check and re-check emails, texts, or forms before sending, double-check lists to ensure you haven’t missed anything that could have repercussions on the predictability of the future. How to challenge these behaviorsYou can challenge the behaviors you’ve adopted to alleviate the discomfort of uncertainty by asking yourself the following questions:
By challenging your need for certainty, you can begin to let go of negative behaviors, reduce stress and worry, and free up time and energy for more practical purposes. Tip 3: Learn to accept uncertaintyNo matter how much you strive to eliminate doubt and volatility from your life, the truth is you already accept a lot of uncertainty every day. Each time you cross a street, get behind the wheel of a car, or eat takeout or restaurant food you’re accepting a level of uncertainty. You’re trusting that the traffic will stop, you won’t have an accident, and everything you’re eating is safe. The chances of something bad happening in these circumstances is small, so you accept the risk and move on without requiring certainty. If you’re religious, you also likely accept some doubt and uncertainty as part of your faith. When irrational fears and worries take hold, it can be hard to think logically and accurately weigh up the probability of something bad happening. To help you become more tolerant and accepting of uncertainty, the following steps can help: Identify your uncertainty triggers. A lot of uncertainty tends to be self-generated, through excessive worrying or a pessimistic outlook, for example. However, some uncertainty can be generated by external sources, especially at times like this. Reading media stories that focus on worst-case scenarios, spending time on social media amid rumors and half-truths, or simply communicating with anxious friends can all fuel your own fears and uncertainties. That’s the reason why so many people start panic-buying when bad news breaks—they see others doing it and it feeds their own fears. By recognizing your triggers, you can take action to avoid or reduce your exposure to them. Recognize when you feel the need for certainty. Notice when you start to feel anxious and fearful about a situation, begin to worry about what-ifs, or feel like a situation is far worse than it actually is. Look for the physical cues that you’re feeling anxious. You might notice the tension in your neck or shoulders, shortness of breath, the onset of a headache, or an empty feeling in your stomach. Take a moment to pause and recognize that you’re craving reassurance or a guarantee. [Read: Anxiety Disorders and Anxiety Attacks] Allow yourself to feel the uncertainty. Instead of engaging in futile efforts to gain control over the uncontrollable, let yourself experience the discomfort of uncertainty. Like all emotions, if you allow yourself to feel fear and uncertainty, they will eventually pass. Focus on the present moment and your breathing and allow yourself to simply feel and observe the uncertainty you’re experiencing. Take some slow, deep breaths or try a meditation to keep you anchored in the present. Let go. Respond to the what-ifs running through your head by acknowledging that you’re not a fortune teller; you don’t know what will happen. All you can do is let go and accept the uncertainty as part of life. Shift your attention. Focus on solvable worries, taking action on those aspects of a problem that you can control, or simply go back to what you were doing. When your mind wanders back to worrying or the feelings of uncertainty return, refocus your mind on the present moment and your own breathing. Accepting uncertainty doesn't mean not having a planAccepting uncertainty doesn’t mean you shouldn’t have a plan for some of life’s unforeseen circumstances. It’s always good to have some savings put by in case of unexpected expenses, keep a preparedness kit handy if you live in an area at risk for earthquakes or hurricanes, or have a plan if you or a loved one falls ill. But you can’t prepare for every possible scenario. Life is simply too random and unpredictable. Tip 4: Focus on the presentUncertainty is often centered on worries about the future and all the bad things you can anticipate happening. It can leave you feeling hopeless and depressed about the days ahead, exaggerate the scope of the problems you face, and even paralyze you from taking action to overcome a problem. One of the surest ways to avoid worrying about the future is to focus on the present. Instead of trying to predict what might happen, switch your attention to what’s happening right now. By being fully connected to the present, you can interrupt the negative assumptions and catastrophic predictions running through your mind. You can learn to purposely focus your attention on the present through mindfulness. With regular practice, mindfulness can help change your preoccupation with future worries to a stronger appreciation of the present moment—as well as help calm your mind, ease stress, and boost your overall mood. You can start a mindfulness practice by following an audio meditation or incorporating it into an exercise program, such as walking. Using mindfulness to stay focused on the present can take perseverance. Initially, you may find that your focus keeps wandering back to your future fears and worries—but keep at it. Each time you focus your attention back on the present, you’re strengthening a new mental habit that can help you break free of uncertainty. Tip 5: Manage stress and anxietyTaking steps to reduce your overall stress and anxiety levels can help you interrupt the downward spiral of negative thoughts, find inner calm, and better cope with the uncertainty in your life. Get moving. Exercise is a natural and effective stress-reliever and anti-anxiety treatment. Try adding a mindfulness element and focusing on how your body feels as you move. Pay attention to the sensation of your feet hitting the ground as you walk, run, or dance, for example, or the rhythm of your breathing, or the feeling of the sun or wind on your skin. Make time for relaxation. Choose a relaxation technique such as meditation, yoga, or deep breathing exercises and try to set aside time each day for regular practice. Get plenty of sleep. Excessive worry and uncertainty can disturb your sleep—just as a lack of quality sleep can fuel anxiety and stress. Improving your daytime habits and taking time to relax and unwind before bed can help you to sleep better at night. Eat a healthy diet. Eating healthy meals can help maintain your energy levels and prevent mood swings. Avoid sugary and processed foods and try to add more omega-3 fats—from salmon, walnuts, soybeans, and flaxseeds—to give your overall mood a boost. Authors: Lawrence Robinson and Melinda Smith, M.A.
Last updated: August 30, 2022 Which of the following is a situation where there is a possibility of either lost or gained?Which of the following situation is a situation where there is a possibility of either a loss or a gain? “Principle of indemnity”. The principe of indemnity involves making an insured whole by restoring them to the same condition as before a loss.
Which of the following refers to a condition that may increase the chance of a loss?Hazard: Condition that increases the probability of loss.
What is considered to be a situation that has the potential for loss?A hazard is a condition that increases the possibility of loss. For instance, fire is a peril because it causes losses, while a fireplace is a hazard because it increases the probability of loss from fire.
Which of the following is any situation that presents the possibility of a loss quizlet?A condition or situation that presents a possibility of loss is an exposure.
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Which of the following is a situation where there is a possibility of either a loss or a gain?
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