Final answer:
The tendency of a person diagnosed with a serious illness to try to buy life or health insurance is known as adverse selection.
Step-by-step explanation:
The tendency of a person diagnosed with a serious illness to try to buy life or health insurance is known as adverse selection. Adverse selection refers to the problem in which insurance buyers have more information about whether they are high-risk or low-risk than the insurance company does. This creates an asymmetric information problem for the insurance company because buyers who are high-risk tend to want to buy more insurance, without letting the insurance company know about their higher risk.