What characteristic defines an insurance policy as a unilateral contract?

A unilateral contract is one where only one party is obligated to perform under the terms of the agreement. In the context of an insurance policy, this means that the insurer is the only party legally bound to fulfill the promises made in the contract—in this case, to pay claims or provide benefits when certain conditions are met. The insured, on the other hand, does not have a reciprocal obligation to the insurer; while they may pay premiums and comply with the terms of the policy, they can choose whether or not to enforce the coverage after entering into the contract.

This characteristic distinguishes unilateral contracts from bilateral contracts, where both parties have mutual obligations. In unilateral contracts like insurance, an obligation to perform is established once the insurer accepts the premium payment after the policy has been issued. Thus, the correct understanding of unilateral contracts directly correlates to the dynamics in an insurance policy, highlighting that the insurer's commitment is what primarily defines the relationship established through the contract.