In insurance contracts, what does the term unilateral mean?

In insurance contracts, the term unilateral refers to a situation where only one party is legally bound by the contract. In the context of insurance, this means that the insurer is the only party that is legally obligated to provide coverage for losses as dictated by the policy terms. The insurer agrees to pay claims upon the occurrence of covered events, as long as the premiums are paid by the insured.

While the insured does have responsibilities, such as paying premiums and providing accurate information, there is no reciprocal obligation on the part of the insured to pay a claim. Therefore, the essence of a unilateral contract lies in the fact that only the insurer has a binding promise, which creates the coverage that the insured relies upon. The obligation to provide coverage remains with the insurer as long as the contract is in effect, illustrating the nature of unilateral commitments in insurance agreements.