2.2 Distinct Characteristics Of an Insurance Contract Copy

Contract of Adhesion

Insurance policies are contracts of “adhesion.” Terms are drawn up by the insurer, and the insured simply “adheres.” Any ambiguity must be interpreted in favor of the insured because the insured has little or no control over policy content.

Aleatory Contract

An insurance policy is an aleatory contract, which means that performance depends on the occurrence of an uncertain event.

Personal Contract

Generally, insurance policies are personal contracts between the insured and the insurer. Except for life insurance and some marine coverage involving transportation and cargo, insurance is not transferable to another person without the consent of the insurer

Unilateral Contract

Insurance usually involves unilateral contracts. Under a bilateral contract, a promise is exchanged for another promise, and both parties may execute the obligations in the future. Under a unilateral contract, an act is exchanged for a promise. Once the insured pays the policy premium, only the insurer makes promises about future performance.

Conditional Contract

Insurance contracts are also conditional contracts because when a loss occurs certain conditions must be met to make the contract legally enforceable.