Final answer:
Conditional agreement is the contract characteristic that ensures both the insured and insurer must meet specific conditions for the insurance contract to be valid. Insurance is based on sharing risk and operates on the principle of actuarially fair policies, though the estimation of risk is challenged by imperfect information.
Step-by-step explanation:
The contract characteristic that requires both the insured and the insurer to meet certain conditions for the contract to be enforceable is known as conditional agreement. This refers to a fundamental principle of contract law where both parties must uphold certain obligations and conditions for the agreement to remain valid. In the context of an insurance contract, these conditions may include the insured party paying premiums and providing accurate information, while the insurer agrees to compensate for losses in the event of the specified risk occurring.
Insurance fundamentally operates as a way to share risk among people through premiums paid to protect against unforeseen events like accidents, illness, or theft. However, due to imperfect information and the inability to predict future events with certainty, there is an inherent uncertainty involved in determining the exact risk for an individual. Despite these challenges, insurance relies on the law of averages and the assumption of an actuarially fair system where the premiums collected generally balance out with the compensations paid out over time.