Which term describes an insurance contract that requires both parties to act honestly?

The term that describes an insurance contract requiring both parties to act honestly is "Contract of Utmost Good Faith." This principle, known as "uberrima fides," obligates both the insured and the insurer to disclose all relevant facts and not to mislead each other. It is fundamental to the insurance industry, as it ensures that all parties have a fair understanding of the risks involved and the terms of the contract. This mutual trust allows for a more effective assessment of risk and fair pricing of the insurance coverage.

In contrast, other contract types such as "Contract of Adhesion" lack this mutual obligation, as they are typically drafted by one party with little room for negotiation by the other. An "Aleatory Contract" involves an element of chance, with payments depending on uncertain future events, while a "Unilateral Contract" only creates obligations for one party, typically the insurer. Each of these concepts differs fundamentally from the requirement of utmost good faith, which emphasizes the importance of honesty and transparency in the insurer-insured relationship.