Characteristics of an insurance contract:

1. Consensual – perfected by the meeting of the minds of the parties

2. Voluntary – it is not compulsory and the parties may incorporate such terms and conditions as
they may deem convenient which will be binding provided they are not against the law or public
policy
3. Aleatory – depends upon some contingent event
4. Executed – as to the insured after the payment of the premium
5. Executory – as to the insurer as it is not executed until payment for a loss
6. Conditional – subject to conditions the principal one of which is the happening of the event
insured against
7. Personal – each party in the contract have in view the character, credit and conduct of the other

There are a number of characteristic peculiar to insurance, namely:

1. Personal. The insurer takes into account the character, credit, and conduct of the insured. In
case of change of ownership over an insured property, the coverage does not automatically
transfer to the new owner. The insurer has the option not to extend cover to the said insured
property if ever the new owner applies for a continuation of the existing insurance.
2. Unilateral. The terms and conditions of the insurance did not arise from the meeting of the
minds of the insurer and insured. The wordings are solely prepared by the former. It is the
reason why in case of doubt in the interpretation of the terms and conditions of the insurance
contract, it shall be construed in favor of the latter in case there is ambiguity.
3. Conditional. The obligation of the insurer to pay the insured is dependent upon the compliance
of the insured with the terms and conditions of the insurance contract such as payment of
premium, timely filing of a claim, and submission of proofs of loss, among others.
4. Aleatory. The obligation of the insurer to pay the insured is conditioned upon the happening of
the contingent event such as the perils of fire or flood.
5. Executory. Insofar as the insurer is concerned, the insurance contract is merely executory. It is
not executed until there is a loss on the part of the insured.
6. Consensual. A contract of insurance is a product of the meeting of the minds of the insured and
the insurer. The mere submission of the application without the corresponding approval of the
policy does not result in the perfection of the contract of insurance. (Great Pacific Life Assurance
Corp. vs. Court of Appeals, 89 SCRA 543)
  Aleatory contract

 Unilateral contract

 Conditional contract

 Personal contract

 Contract of adhesion

- With many contracts, the two parties can negotiate the terms of
the contract before they sign it. With insurance contracts,
however, the insurer writes the contract in its entirety and you
can either take it or leave it. You don't get to dictate the terms of
the policy, and you must pay corresponding premiums for any
changes you do request after it is in force. Because you must
adhere to the insurer's contract without negotiating its terms,
insurance policies are contracts of adhesion.

Unique

 Aleatory contract

 Unilateral contract

 Conditional contract

 Contract of adhesion
Characteristics of Insurance Contracts
Though all contracts share fundamental concepts and basic elements, insurance
contracts typically possess a number of characteristics not widely found in other types
of contractual agreements. The most common of these features are listed here:

Aleatory

If one party to a contract might receive considerably more in value than he or she gives

up under the terms of the agreement, the contract is said to be aleatory. Insurance
contracts are of this type because, depending upon chance or any number of uncertain
outcomes, the insured (or his or her beneficiaries) may receive substantially more in
claim proceeds than was paid to the insurance company in premium dollars. On the
other hand, the insurer could ultimately receive significantly more dollars than the
insured party if a claim is never filed.

Adhesion

In a contract of adhesion, one party draws up the contract in its entirety and presents it
to the other party on a 'take it or leave it' basis; the receiving party does not have the
option of negotiating, revising, or deleting any part or provision of the document.
Insurance contracts are of this type, because the insurer writes the contract and the
insured either 'adheres' to it or is denied coverage. In a court of law, when legal
determinations must be made because of ambiguity in a contract of adhesion, the court
will render its interpretation against the party that wrote the contract. Typically, the court
will grant any reasonable expectation on the part of the insured (or his or her
beneficiaries) arising from an insurer-prepared contract.

Utmost Good Faith

Although all contracts ideally should be executed in good faith, insurance contracts are
held to an even higher standard, requiring the utmost of this quality between the parties.
Due to the nature of an insurance agreement, each party needs - and is legally entitled -
to rely upon the representations and declarations of the other. Each party must have a
reasonable expectation that the other party is not attempting to defraud, mislead, or
conceal information and is indeed conducting themselves in good faith. In a contract of
utmost good faith, each party has a duty to reveal all material information (that is,
information that would likely influence a party's decision to either enter into or decline
the contract), and if any such data is not disclosed, the other party will usually have the
right to void the agreement.

Executory

An executory contract is one in which the covenants of one or more parties to the
contract remain partially or completely unfulfilled. Insurance contracts necessarily fall
under this strict definition; of course, it's stated in the insurance and agreement that the
insurer will only perform its obligation after certain events take place (in other words,
losses occur).

Unilateral

A contract may either be bilateral or unilateral. In a bilateral contract, each party

exchanges a promise for a promise. However, in a unilateral contract, the promise of
one party is exchanged for a specific act of the other party. Insurance contracts are
unilateral; the insured performs the act of paying the policy premium, and the insurer
promises to reimburse the insured for any covered losses that may occur. It must be
noted that once the insured has paid the policy premium, nothing else is required on his
or her part; no other promises of performance were made. Only the insurer has
covenanted any further action, and only the insurer can be held liable for breach of
contract.

Conditional

A condition is a provision of a contract which limits the rights provided by the contract. In
addition to being executory, aleatory, adhesive, and of the utmost good faith, insurance
contracts are also conditional. Even when a loss is suffered, certain conditions must be
met before the contract can be legally enforced. For example, the insured individual or
beneficiary must satisfy the condition of submitting to the insurance company sufficient
proof of loss, or prove that he or she has an insurable interest in the person insured.

There are two basic types of conditions: conditions precedent and conditions
subsequent. A condition precedent is any event or act that must take place or be
performed before the contractual right will be granted. For instance, before an insured
individual can collect medical benefits, he or she must become sick or injured. Further,
before a beneficiary will be paid a death benefit, the insured must actually become
deceased. A condition subsequent is an event or act that serves to cancel a contractual
right. A suicide clause is an example of such a condition. Typical suicide clauses cancel
the right of payment of the death benefit if the insured individual takes his or her own life
within two years of a life insurance policy's effective date.
Nature of INSURANCE Contract
Nature of contract is a fundamental principle of insurance contract. An insurance
contract comes into existence when one party makes an offer or proposal of a contract
and the other party accepts the proposal. A contract should be simple to be a valid
contract. The person entering into a contract should enter with his free consent.