Adhesion Insurance Contract

What Does Adhesion Insurance Contract Mean?

An adhesion insurance contract is a type of contract where one party sets the terms and provisions, while the other party has no involvement in drafting them. The second party’s role is limited to either accepting or declining the terms. An insurance policy is an example of an adhesion contract.

Insuranceopedia Explains Adhesion Insurance Contract

In most contracts, all parties are involved in the wording or details before reaching an agreement and making it legally binding. In insurance, however, this is not the case. The standard insurance policy comes with pre-established terms and conditions before it is signed and purchased by the insured. The client’s participation is typically limited to agreeing or disagreeing (by not purchasing) with the policy presented. This is why an insurance contract is considered an adhesion contract.

However, some policies allow the policyholder to make modifications through riders. For example, in certain automobile insurance policies, the insured may add provisions later, such as expanding coverage to include additional risks or adding more individuals to the policy.