Insurance contracts are considered aleatory contracts because:

Insurance contracts are classified as aleatory contracts primarily because they involve an exchange of potentially unequal values between the parties involved. In these agreements, one party (the insurer) agrees to provide coverage or compensation contingent upon a certain event occurring, such as an accident or loss. The policyholder pays premiums, which are often much smaller than the potential claim amount they could receive in the event of a covered loss.

The unequal nature of this exchange is what defines the aleatory characteristic, as the outcomes are uncertain, and the value received by each party is not equal. The insurer might receive a series of premium payments without ever having to pay a claim if no losses occur, while a policyholder could receive a substantial payout for a relatively small premium if a claim is made.

Understanding this distinction is crucial in grasping the foundational principles of insurance and how risk transfer operates within contracts. This characteristic is why insurance is built on the concept of risk pooling, where the costs and benefits vary widely among participants.