Which statement best reflects a unilateral insurance contract?

Which statement best reflects a unilateral insurance contract?

• A. Only the insurer makes a promise that can be enforced
• B. Both parties make enforceable promises
• C. Only the insured makes a promise
• D. There is no promise involved until a loss occurs

Answer: (A)

Unilateral contracts involve one party making a binding promise, with the other party’s acceptance coming through performance. In insurance, the insurer’s binding promise is to pay for covered losses if they occur. The insured’s role is to pay premiums and provide information, which keeps the policy in force, but it does not create a binding promise by the insurer to pay benefits independent of a loss. Therefore the enforceable promise rests with the insurer, making the contract unilateral. The other ideas imply promises on both sides or no promise until a loss, which don’t fit the unilateral structure as well.

Unilateral contracts involve one party making a binding promise, with the other party’s acceptance coming through performance. In insurance, the insurer’s binding promise is to pay for covered losses if they occur. The insured’s role is to pay premiums and provide information, which keeps the policy in force, but it does not create a binding promise by the insurer to pay benefits independent of a loss. Therefore the enforceable promise rests with the insurer, making the contract unilateral. The other ideas imply promises on both sides or no promise until a loss, which don’t fit the unilateral structure as well.