What is aleatory contract in an insurance policy

Aleatory contracts are agreements where a party doesn't have to perform contractual obligations unless a specified event happens. These contracts also feature unequal consideration—for instance, an insured party will only receive coverage in return for premiums and won't get a payout unless the specified event happens.

What is meant by an aleatory contract?

Aleatory means that something is dependent on an uncertain event, a chance occurrence. Aleatory is used primarily as a descriptive term for insurance contracts. An aleatory contract is a contract where performance of the promise is dependent on the occurrence of a fortuitous event.

What is an example of an aleatory contract?

An aleatory contract is a contract where an uncertain event determines the parties' rights and obligations. For example, gambling, wagering, or betting typically use aleatory contracts. Additionally, another very common type of aleatory contract is an insurance policy.

In what way are insurance policy said to be aleatory?

In insurance, an aleatory contract refers to an insurance arrangement in which the payouts to the insured are unbalanced. Until the insurance policy results in a payout, the insured pays premiums without receiving anything in return besides coverage.

What is meant by referring to an insurance policy as a unilateral contract?

Unilateral Contract — a contract in which only one party makes an enforceable promise. Most insurance policies are unilateral contracts in that only the insurer makes a legally enforceable promise to pay covered claims.