What is aleatory contract in insurance terms

Aleatory Contract — an agreement concerned with an uncertain event that provides for unequal transfer of value between the parties. Insurance policies are aleatory contracts because an insured can pay premiums for many years without sustaining a covered loss.

What is an example of an aleatory contract?

For example: A fire insurance company promises A that in consideration of A's payment of a premium, it will pay A $20,000 if A's house burns down by a fire caused by lightning. In this aleatory contract, the fire insurance company will not be liable if A's house burned down by a fire caused by an overheated fireplace.

What are the characteristics of an aleatory contract?

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 the difference between a commutative contract and an aleatory contract?

An adhesion contract, often referred to as a contract of adhesion, is an agreement between two parties where one party has a significant power advantage in setting the terms of the agreement. Think of a consumer and a cell phone provider. In these instances, the consumer has little — if any — real negotiating power.