Massachusetts State Life Insurance Practice Exam

Disable ads (and more) with a membership for a one time $2.99 payment

Study for the Massachusetts State Life Insurance Exam. Use our flashcards and multiple choice questions, each with hints and explanations. Prepare confidently for your test!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

What does it mean if an insurance contract is characterized as 'unilateral'?

Both parties are equally obligated
Only one party is bound to fulfill their obligations
Both parties enter with equal risk and responsibility
It is non-binding until both parties agree

The correct answer is: Only one party is bound to fulfill their obligations

A unilateral insurance contract means that only one party, typically the insurer, is obligated to fulfill their part of the agreement. In this context, the insurer promises to pay out a benefit, such as a death benefit or a claim payment, upon the occurrence of a specified event in exchange for the policyholder’s premium payments. The policyholder, on the other hand, is not legally required to continue making payments after the contract is signed; they can choose to stop paying premiums without facing legal repercussions. This nature of unilateral contracts is significant because it creates a binding obligation on one side, which is the hallmark of such agreements. The insurer's obligation to pay benefits arises solely from the contract, and while the insured agrees to pay premiums, that obligation is contingent upon their decision to maintain the policy.