Which feature of an insurance contract indicates that only one party is legally bound to the agreement?

In an insurance contract, the term that refers to a situation where only one party is legally bound to the agreement is "unilateral." This characteristic emphasizes that in a unilateral contract, only one side—the insurer—has made a legally enforceable promise. In contrast, the policyholder provides consideration in the form of premiums but does not make a binding promise regarding future actions; they simply have the right to claim benefits as stipulated in the contract.

For example, when a policyholder pays their premiums, they are relying on the insurance company to cover specific risks as outlined in the policy. The insurer is obligated to fulfill its promise to pay claims covered by the policy if certain conditions are met. This one-sided obligation is what fundamentally distinguishes unilateral contracts from other types—like bilateral contracts—where both parties have mutual obligations.

Understanding this feature is crucial for comprehending the nature of insurance agreements, especially when assessing the rights and responsibilities of the parties involved.