Why is an insurance policy considered a conditional contract?

An insurance policy is considered a conditional contract because it includes specific terms and conditions that must be fulfilled for coverage to apply. This means that both the insurer and the insured have obligations that must be met to ensure that the contract remains valid. For instance, the insured must pay premiums and disclose pertinent information, while the insurer must provide coverage for specified risks.

If the conditions laid out in the policy are not met, the insurer may have the right to deny a claim. This dynamic establishes a reliance on certain conditions being satisfied, reinforcing the idea that the contractual agreement is based on contingencies that must occur for the policy to be effective.