Rhode Island Life Insurance Practice Exam

What is one characteristic of a Unilateral insurance contract?

1. Both parties make promises

2. Only the insurer makes an enforceable promise

3. It applies to all policyholders

4. The insured must make premium payments

The correct answer is: Only the insurer makes an enforceable promise

A Unilateral insurance contract is characterized by the fact that only one party, which is the insurer, makes an enforceable promise. In this type of contract, the insurer pledges to provide benefits or coverage according to the terms of the policy, while the insured does not make any promises that can be legally enforced. Instead, the insured's role is generally to pay premiums in exchange for the benefits described in the contract. The enforceability of the insurer's promise allows the insured to rely on the contract to receive payment or coverage in the event of a qualifying occurrence. The other choices do not reflect the nature of unilateral contracts, as they suggest mutual obligations or characteristics that do not apply to this type of agreement. In unilateral contracts, the promises are primarily one-sided, hence the name "unilateral," indicating that only the insurer's commitments are enforceable.