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Aleatory Contract

A contract whose value to either or both of the parties depends on chance or future events, or where the monetary values of the parties’ performance are unequal. Insurance contracts are aleatory because the policyowner pays premiums to the insurer, and in return the insurer promises to pay benefits if the event insured against occurs. The policyholder pays a premium and may collect nothing from the insurer if no loss occurs. On the other hand, if a loss does occur, the policyholder may collect considerably more than the amount of the premium.