ECONOMICS
INSURANCE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Only the insurance company is bound to live up to its side of the agreement
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It is a contract of unequal value
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One party prepares the contract with little or no input or negotiation from the other party
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Only the insured is bound to live up to its side of the agreement
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Detailed explanation-1: -Insurance contracts are typically good examples of classic adhesion contracts. Virtually every insurance policy agreement is prepared solely by the insurance company. These agreements are lengthy and the insured party, particularly an individual, has little if any ability to change any of the terms.
Detailed explanation-2: -An adhesion contract, also known as a contract of adhesion, is a contract where the parties are of such disproportionate bargaining power that the party of weaker bargaining power could not have negotiated for variations in the terms of the contract.
Detailed explanation-3: -Contract of adhesion is a legal concept wherein a contract is offered intact to one party by another with the stipulation that the second party accept or reject the contract in total without the opportunity to bargain over the wording.
Detailed explanation-4: -Adhesion-A life insurance policy is a contract of adhesion because buyers must adhere to the terms of the contract already in existence. They have no opportunity to negotiate terms, rates, values, etc.