General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 3/5
An insurance contract is called a unilateral contract because:
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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 makes a legally enforceable promise. The insurer promises to pay covered benefits; the insured's premium payments are generally treated as conditions to be performed rather than enforceable promises. If the insured stops paying, the policy lapses - the insurer does not sue for breach; the condition simply is not fulfilled. This distinguishes insurance from bilateral contracts, where both parties exchange promises.
Why the other options are wrong
- B) It is the insurer's promise of benefits that is the enforceable undertaking, not the insured's.
- C) 'Unilateral' describes which party promises, not cancellation rights; termination is governed by policy and statutory rules.
- D) Unilateral has nothing to do with the number of documents.
Memory hook
One promise - the insurer's. Premiums are conditions, not promises.