A life insurance contract is generally:

• A. an aleatory contract
• B. a bilateral contract
• C. a bargaining (negotiated) contract
• D. a commutative contract

Answer: (A)

Life insurance contracts are aleatory because the insurer’s obligation to pay a stated amount depends on an uncertain event—death. The insured pays premiums now, and the insurer promises to pay the death benefit only if the event occurs. The value exchanged is not predetermined or equal at the outset; the big payoff hinges on a contingent, unpredictable outcome. That reliance on chance and the unequal risk transfer between the parties—premiums paid now for a potential large future payoff—defines an aleatory contract. The other descriptors don’t capture this core feature: the defining point is the contingent, uncertain payoff, not simply how the parties negotiated or the overall balance of value at signing.