Health Insurance Mastery Practice Exam

In the context of health insurance, what does the term 'unilateral contract' refer to?

1. A contract wherein both parties make promises

2. A contract enforced on only one party

3. A contract that is not legally binding

4. A contract that can be voided by either party

The correct answer is: A contract enforced on only one party

In health insurance, the term 'unilateral contract' refers to a contract in which only one party makes a promise or fulfills an obligation, while the other party simply receives the benefits of that promise. In this context, the insurance company makes a promise to pay for covered losses, while the policyholder pays premiums in exchange for that promise. The nature of unilateral contracts means that the insurer is bound to fulfill their obligations as long as the policyholder has paid their premiums, but the policyholder is not required to continue paying premiums after certain conditions are met, such as reaching a specific age or after a certain number of payments. This fundamental characteristic is what distinguishes unilateral contracts from bilateral contracts, where both parties are obligated to perform certain duties. This distinction also helps to clarify why the other options do not accurately describe unilateral contracts. A contract wherein both parties make promises would be a bilateral contract, not unilateral. The idea of a contract that is not legally binding does not apply here, as health insurance contracts are indeed legally enforceable. Lastly, a contract that can be voided by either party does not correspond with the concept of a unilateral contract, as the obligation lies solely with one party—the insurer.