Which of the following best explains why insurance policies are called "unilateral contracts"?

Insurance policies are referred to as "unilateral contracts" primarily because only one party, the insurance company, has a legal obligation to uphold the terms of the contract once a premium is paid. In a unilateral contract, one party makes a promise in exchange for an act performed by the other party. In this case, the insured pays premiums, and in return, the insurance company promises to provide coverage and pay out claims as stipulated in the policy.

This concept emphasizes that the insurer is bound to fulfill its obligations as long as the insured adheres to the terms of the policy, such as making timely premium payments and providing accurate information when making a claim. The insured does not make a legally binding promise to pay premiums in the same sense, as failing to pay premiums can lead to policy cancellation. Therefore, the nature of the insurance policy as a unilateral contract highlights the obligation of the insurance company to perform its promise while the insured's role is more contingent.