What is a unilateral insurance contract?

A unilateral insurance contract is characterized by the fact that only one party, in this case, the insurer, has an obligation to perform. In the context of an insurance policy, the insurer agrees to pay for covered losses or claims, while the insured pays the premium but does not have any obligation to perform beyond that—specifically, they may choose to file a claim or not.

In the insurance relationship, once the insured pays their premium, the insurer is bound to fulfill its promise of coverage upon the occurrence of an event that is covered under the policy. This definition emphasizes that the contract is one-sided in terms of obligations, as the insurer bears the responsibility to provide coverage. The insured's primary role is to pay premiums to maintain the policy, and any further actions depend on their discretion.

Understanding the nature of unilateral contracts is crucial for those entering the field of insurance and public adjusting, as it impacts claims processing and the responsibilities of both parties involved.