Texas All Lines Adjuster Practice Test

In insurance contracts, what does unilateral mean?

1. Both parties make promises to each other

2. Only one party (the insurer) makes a promise

3. Contracts can be voided by either party at any time

4. The insured must fulfill obligations in the contract

The correct answer is: Only one party (the insurer) makes a promise

In the context of insurance contracts, unilateral refers to a situation where only one party, typically the insurer, makes a promise or commitment. In a unilateral contract, the insurer agrees to provide coverage or pay claims, while the insured does not make a reciprocal promise but rather accepts the terms set forth by the insurer. The insured's payment of premiums is not a promise to perform but rather an action that gives rise to the insurer's obligation. This concept is fundamental to understanding the nature of insurance contracts, as they are designed to protect the insured against certain types of risks or losses based solely on the insurer's commitment. The insured benefits from this arrangement without needing to guarantee any specific performance in return, aside from adhering to the contractual terms, such as making timely premium payments.