What term describes a characteristic of an insurance contract, indicating it depends on an unknown future event?

• A. Aleatory
• B. Conditional
• C. Unilateral
• D. Mutual

Answer: (A)

The term "aleatory" accurately describes a characteristic of an insurance contract where the outcome depends on an uncertain future event. In the context of insurance, aleatory contracts involve an exchange that is unequal and contingent upon an event that may or may not happen. For example, a policyholder pays premiums with the hope that a loss will occur, leading the insurer to provide a payout. The risk and benefits of the contract are unequal because the insurer may pay out a large sum in the case of a loss, while the policyholder’s payments could total much less, depending on various factors such as the duration of the contract and occurrence of the insured event.

The other terms do have relevant meanings within the insurance context. "Conditional" would refer to the fact that the insurer's obligation to pay a claim is contingent upon certain conditions being met, such as the occurrence of a covered loss. "Unilateral" denotes that only one party (the insurer) is legally bound to act, while the policyholder has certain rights but is not obligated in the same way. "Mutual" typically relates to an arrangement where two or more parties have mutual rights and obligations, sometimes specifically referring to insurance companies owned by policyholders. However, "aleatory" is the