Question

You recently met with your client, Tripp, to discuss his insurance policies. Tripp was reading a book on contracts and wanted to know how his insurance contract related to the material he was reading and to his circumstances. During your conversation, Tripp made several statements to clarify that he understood insurance. Which of the following statements would you have told him was incorrect? An insurance contract is unilateral, where both parties agree to a legally enforceable promise. The insurance contract is aleatory, where unequal monetary values are exchanged. An insurance contract is based on the principal of indemnity, where the insured cannot make a profit from a claim on insurance. An insurance contract is a contract of adhesion, where the insured accepts the contract as written and is unable to negotiate the terms of the contract.

Answer 1

Let us analyse the four statements one by one.

1. An insurance contract is unilateral, where both parties agree to a legally enforceable promise.

An insurance contact, is indeed unilateral, but both parties do not make any prmise. The insurer makes a legally enforceable promise to pay covered claims. The insured doesn't actually promise to do anything, not even pay the premiums. The insurance company, on the other hand, makes conditional promises: If the premiums are paid, and a covered loss happens, and the insured files a timely claim, and (other similar conditions), then the company will pay.
So Statement 1 is incorrect.

2. The insurance contract is aleatory, where unequal monetary values are exchanged.

In insurance, the premium paid is less than the potential benefit to be received in the event of loss., Hence, it is aleatory in nature.
So Statement 2 is correct.

3. An insurance contract is based on the principal of indemnity, where the insured cannot make a profit from a claim on insurance

One of the basic tenets of insurance is that the insured should not profit from a loss or damage but should be returned (as near as possible) to the same financial position that existed before the loss or damage occurred. In other words, the insured cannot recover more than his or her actual loss from the insurer.
So Statement 3 is correct.

4. An insurance contract is a contract of adhesion, where the insured accepts the contract as written and is unable to negotiate the terms of the contract.

One party, the insurance company in this case, prepares the contract and submits it to the other party, the insured in this case, on a "take-it-or leave-it" basis (without negotiation). Hence, it is indeed a contract of adhesion.
So Statement 4 is correct.