A life insurance contract is classified as which of the following?

• A. I only
• B. II only
• C. Both I and II
• D. Neither I nor II

Answer: (A)

Life insurance contracts are unilateral agreements. Only the insurer makes a binding promise to pay the death benefit if the insured dies while the policy is in force. The insured’s role is mainly to pay premiums to keep the coverage in effect; that premium obligation does not create a promise by the insured to pay a benefit. Because the insurer’s promise to pay is not conditioned on the insured promising to perform (beyond maintaining the policy by paying premiums), the contract is not a bilateral agreement where both sides are promising to perform. This is why the correct choice reflects that only the first statement applies: life insurance is classified as a unilateral contract.