A bad habit encompassing unlimited harm — greed (7)
I believe the answer is:
avarice
'greed' is the definition.
(synonyms)
'a bad habit encompassing unlimited harm' is the wordplay.
'bad habit' becomes 'vice' (a sin or weakness).
'encompassing' is an insertion indicator.
'unlimited' means to look at the middle letters (discard the edges or 'limits' of the word).
The middle letters of 'harm' are 'ar'.
'vice' placed around 'ar' is 'varice'.
'a'+'varice'='AVARICE'
(Other definitions for avarice that I've seen before include "Greed for gain" , "Parsimony" , "Eager desire" , "Sway, control" , "Stinginess" .)