Life & Health Insurance Practice Exam 2025 - Free Practice Questions and Study Guide

Question: 1 / 470

What does it mean when a contract is deemed 'unilateral'?

Only one party is legally bound to fulfill the contract

A contract being deemed 'unilateral' means that only one party has an obligation to fulfill the terms of the contract. This type of contract typically involves one party making a promise or commitment that the other party can accept without having to make a reciprocal promise. In the context of life and health insurance, for example, the insurer is obligated to pay benefits upon the occurrence of a specified event (like the death of the insured) once the policyholder has fulfilled their obligation of paying the premium. The policyholder does not have to promise to do anything in return, which solidifies the unilateral nature of the agreement. This characteristic is fundamental in understanding the dynamics of insurance contracts as it highlights the asymmetrical obligations involved.

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Both parties have equal obligations

It requires mutual consent for changes

It allows for negotiable terms

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