What does "aleatory" in an insurance contract mean?

The term "aleatory" in an insurance contract refers to the reliance on chance, indicating that the outcomes of the contract are uncertain and dependent on future events. In insurance contexts, this means that one party (the insurer) may receive payments (premiums) from the insured without having to pay out claims, depending on whether an insured event occurs. Conversely, if the event does happen, the insurer must provide benefits or payouts, which may far exceed the premiums collected. This unpredictability embodies the aleatory nature of the contract, as the benefits are not guaranteed and only materialize under specific, often unforeseen circumstances.

Understanding that contracts are aleatory helps clarify why premiums can be lower than the potential payouts—because the insurer is calculating risk based on the likelihood of insured events occurring. The other options do not capture the essence of "aleatory," as legal binding, mutual consent, and fixed outcomes do not inherently involve an element of chance.