Conditions

Discourage people from buying coverage only after they learn they need care, reducing adverse selection — Preexisting condition limitations and waiting periods attack the core of adverse selection: the temptation to purchase insurance after a condition has already developed. If an applicant could immediately collect for a condition known before enrollment, the risk pool would be flooded with certain losses. These provisions, together with application questions and underwriting, keep the timing of purchase aligned with genuine risk transfer. (Under the ACA, such limitations are restricted in many plans, but the anti-selection rationale remains a foundational concept.)

National insurance concept

Adhesion, unilateral, and conditional — The policy is a contract of adhesion because the insurer drafts it on a take-it-or-leave-it basis. It is unilateral because only the insurer makes a legally enforceable promise — the insured's premium obligation operates as a condition. It is conditional because the insurer's duty to pay arises only when conditions (premium paid, covered loss, timely notice) are met. These three characteristics together describe nearly every insurance policy, and identifying them from a scenario is a core contract-law skill.

National insurance concept