The insurance contract is a unilateral contract. This means that with the payment of the premium and the actual taking effect of the contract, only one of the parties promises to do anything further. Only the insurance company has promised certain performance. The company has promised indemnity in case of loss. The company cannot force any action on the part of the insured. The insured has made no legally enforceable promises and cannot be held for breach of contract.



Even the affordable life insurance (http://www.equote.com/li/term-life-insurance-quote.html) contract is conditional. It is true that the contract becomes completely executed by the insured with the payment of the premium and that only the insurance company is obligated to keep a promise. This is not to say, however, that the insured has no further conditions to meet if he wishes to collect losses.

The difference between promises and conditions is that promises are legally enforceable, whereas conditions are not. The effect of a breached condition is to prevent a person from collecting from the insurance company. Under a contract of fire insurance, for example, the insurance company promises to indemnify the insured for losses caused by fire.

The insured is subject to several conditions relating to filing proofs of loss following a fire. He is not under legal obligation, however, to file proofs of loss as required by the conditions in the policy. He need file them only if he wishes to collect. On the other hand, the insurance company can be forced by law to keep its promise to pay indemnity if the insured has met all the conditions outlined in the contract.

The holder of a term life insurance (http://www.equote.com/li/level-term-life-insurance.html) policy is not even under obligation to continue premium payments should he wish to discontinue the policy. He is obligated, of course, for the payment of premiums for protection received before the date of cancellation.

If a man orders a fire insurance policy on his house and a month later, when the premium statement is tendered by the agent, tells the agent he has decided the policy is not needed, the house owner will be legally obligated to pay the agent the proper premium for the thirty days of protection he has received. Although in many cases he avoids this obligation.

When a request is received by an agent for a property or low cost life insurance (http://www.equote.com/li/nomedicallifeinsurance.html) coverage, in most cases the protection starts at once, even though the policy itself may not be delivered for several weeks. This temporary protection is provided by a binder that is issued by the agent to the insured. This is a temporary insurance policy which is just as binding on both parties as a complete, printed policy would be.

If a loss occurs during the life of the binder before the permanent policy is received, no insured would think of challenging the validity of the document. It is surprising, on the other hand, to find so many people whose house does not burn or whose automobile is not wrecked during this period of binder protection who feels that the binder really furnished them no protection and that they owe nothing to the insurance company.

The protection furnished by the binder is identical with that provided by the policy, and the charge for the protection is the same. Use of a binder makes possible the instant application of insurance protection; and it would be too bad if policyholder abuse of binders, through failure to understand their true nature, led insurance companies to force insureds to await the issuance of the regular policy to begin insurance protection.