General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
An insurance policy is called a unilateral contract because:
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
In a unilateral contract, only one party makes an enforceable promise. The insurer promises to pay covered benefits, while the insured pays premiums as a condition of coverage but does not promise to continue paying; the insured may simply stop paying and allow the policy to lapse. This one-sided promise structure is what distinguishes insurance from a bilateral contract, in which both parties make enforceable promises to each other.
Why the other options are wrong
- A) A contract in which both parties make enforceable promises is bilateral, not unilateral.
- C) The insurer is bound by its promise; the contract is enforceable against the insurer.
- D) The insured has conditions to satisfy, such as paying premiums, and the insurer also has rights under the contract.
Memory hook
One promise, a one-way street running from insurer to insured.