General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
An insurance policy is a unilateral contract. This means that:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
In a unilateral contract, only one party — the insurer — makes a legally enforceable promise to pay if a covered loss occurs. The insured makes no legally enforceable promise to do anything; they may stop paying premiums at any time, in which case coverage lapses. The insured's premium payment keeps the insurer's promise alive, but it is not a promise the insurer can sue to enforce.
Why the other options are wrong
- B) Simultaneous performance describes a commutative contract; insurance is aleatory and performance depends on a future uncertain event.
- C) It is the insurer, not the insured, who makes the enforceable promise in an insurance contract.
- D) Unilateral refers to who makes promises, not to cancellation rights; the policy's cancellation provisions govern termination.
Memory hook
Unilateral = one promise that matters — the insurer's. You can walk away anytime; the insurer cannot.