General Insurance PrinciplesQuestion 173 of 474
An insurance policy is classified as a unilateral contract because:
a.only the insured is bound, and must keep paying premium each term
b.only the insurer gives a legally enforceable promise of performance
c.one signature, the applicant's, is needed to put the policy in force
d.the insurer may change the wording at any time during the term
Explanation
Once the premium is paid the insurer alone has made an enforceable promise, the promise to pay covered losses. The insured cannot be sued for refusing to pay the next premium; coverage simply ends, which is why the answer saying only the insured is bound is backwards. Unilateral describes whose promise can be enforced, not how many signatures the paperwork carries.
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