Texas All Lines Adjuster Practice Test

What characteristic is associated with adhesion in insurance contracts?

1. Mutual agreement on every term

2. Pre-established terms set by one party

3. Flexibility in contract terms

4. Voluntary negotiations between parties

The correct answer is: Pre-established terms set by one party

Adhesion in insurance contracts is characterized by pre-established terms set by one party, typically the insurer. This principle reflects the nature of contracts of adhesion, where one party (the insurer) drafts the contract and presents it to the other party (the insured) on a take-it-or-leave-it basis. The insured usually has little to no ability to negotiate the terms, which can lead to situations where the insured may not fully understand all the specifics of the contract but must accept them to obtain the insurance coverage. This unbalanced power dynamic is fundamental to adhesive contracts, resulting in standardization of terms and conditions that are set by the stronger party in the negotiation, which is usually the insurance company. The insured's acceptance of these terms typically indicates their conformity to the contract without the opportunity for modification, reinforcing the characteristic of adhesion in this context.