Aleatory Copy

Because insurance policies operate with an assumption of chance, they are considered to be aleatory contracts.

This means that one party could benefit from the contract, while the other could lose. The insured may pay premiums on the policy for years and never once file a claim. For example, suppose Eduardo has paid more than $1000 per month for his insurance policies for more than five years and has never filed a claim. Over this period of time, the insurer has made a huge profit by insuring Eduardo.

Or, the insurer may pay claims that far exceed what it earns in premiums from a particular customer. For instance, Elise pays about $75 per month for her auto insurance. She was recently in a car accident, causing her insurer to pay $500,000 in claims. This is a huge loss for the insurer.

The outcome is beyond both parties’ control. Each party is willing to take on the possibility of suffering an unfavorable outcome when they enter the contract.