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Adhesion Insurance (What It Is And Why It’s Important: Overview)

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What is adhesion in insurance?

What are the essential elements you should know!

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Let’s define an insurance adhesion contract and see why it’s important!

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Adhesion Insurance Overview

Adhesion insurance is a type of insurance policy where the policyholder accepts the terms and conditions of the insurance contract without the possibility of negotiating its terms or making important modifications.

In essence, when an insurance company offers an adhesion insurance contract, you are required to accept those terms or find another insurance company to offer you coverage.

In most cases, contracts are mutually negotiated where the contracting parties agree to terms and conditions that are beneficial to them finding the right balance between them.

However, in the case of an insurance adhesion contract, the insurer dictates the terms of the policy and expects the insured to accept them without much negotiation.

A contract of adhesion is a legally binding contract in most cases even though one party stipulated its essential terms and conditions while the other had no choice but to accept it.

To better understand adhesion insurance, let’s define “adhesion” in insurance, contract of adhesion, and insurance contract.

Adhesion In Insurance

What is adhesion in insurance?

Adhesion in insurance means that the insured (the client) accepts the insurance company’s (insurer) terms and contract presented in an insurance policy.

Since the insurance company is the one writing the terms and conditions of the policy of adhesion, you should expect that most of its terms will be in the insurance company’s favor.

As a client, you must either “adhere” or “accept” the insurance terms and conditions or you should reject it and take your business elsewhere.

Contract of Adhesion 

A contract of adhesion is a type of contract where one party determines the essential terms and conditions of the contract and imposes them on the other party.

According to IRMI, a contract of adhesion is defined as follows:

A contract offered intact to one party by another under circumstances requiring the second party to accept or reject the contract in total without having the opportunity to bargain over the wording.

Typically, the party imposing the terms on the other has more negotiating power or leverage at the moment the contract is being negotiated and signed.

In insurance, many insurance policies are essentially qualified as a contract of adhesion as the insurer determines the terms and conditions based on which it will agree to indemnify the policyholder.

Insurance Contract

An insurance contract is a type of contract where an insurance company (the insurer) provides a company or individual (policyholder) protection against certain risks in exchange for a premium paid by the policyholder.

The objective of the insurance company is to collect premiums from its policyholders and minimize payouts whereas the objective of the policyholder is to obtain financial protection against a specific type of risk or event.

Adhesion Insurance Definition

What is the definition of adhesion insurance?

My adhesion contract insurance definition is as follows:

An adhesion insurance contract is one where the insurance company determines the essential terms and conditions of an insurance policy and where the insured “adheres” or “accepts” those terms without the possibility of negotiation.

The adhesion insurance definition can be summed up as follows:

  • It’s a contract between two parties
  • The terms and conditions are determined by one party who has more negotiating power 
  • The other party can either accept those terms “as is” or refuse to sign the entire thing 
  • The contract relates to an insurance coverage 

Types of Adhesion Contracts

Adhesion contracts are not only used in the insurance industry but they are also used in other areas as well.

You are likely to find adhesion contracts a lot in the banking sector and financial industry in general.

For example, the following types of contracts could very well be of adhesion:

  • Property lease 
  • Deed of mortgage 
  • Deed of trust 
  • Car purchase agreement
  • Car rental agreement 
  • Leases
  • Vehicle purchases 

The reason why a company or business uses contracts of adhesion is to possibly reduce the transaction costs.

For example, a bank may enter into millions of financial transactions a year and it would not be possible for them to negotiate every contract with every customer. 

As a result, banks, financial institutions, insurance companies and many other companies will use a contract of adhesion to have one standard contract applicable to all of their customers in a uniform manner.

Understanding Adhesion Insurance

Insurance contracts are generally qualified as contracts of adhesion as the insurer dictates the terms of the coverage and the insured has the ability to accept those terms in bulk or walk away.

Here are some important elements regarding the law of adhesion insurance and how they work.

Legal Qualification

Any contract that is entered into between two or more contracting parties where one party defines the essential terms of the agreement and that same party is the one drafting the contract language can be qualified as an “adhesion contract”.

The characteristics of an adhesion contract is:

  • One party has a stronger negotiating power
  • The strong party drafts the terms of the contract
  • The strong party imposes the terms of the contract
  • The weaker party is unable to negotiate key terms of the contract
  • The weaker party must either accept it all or refuse it all 


Insurance adhesion contracts are legally binding and enforceable contracts, generally speaking.

However, there may be instances where a policyholder may challenge the terms of a contract and the courts may find that the insurance company was not clear or the contractual provisions were ambiguous.

In that case, it’s possible that the courts rule in favor of the policyholder as the courts will interpret the contract against the party that imposed its terms.

The courts may use the doctrine of reasonable expectations to assess the enforceability of an insurance contractual provision.

With unequal bargaining power, the courts tend to ensure that the terms of the contract do not lead to unfair or unconscionable outcomes.


Who can modify a policy of adhesion?

An insurance adhesion policy cannot be amended unilaterally unless it respects the amendment procedures outlined in the contract.

In practice, insurance companies, in some cases, will accept to modify certain terms of the policy by issuing a rider to the policy.

With a rider, the policy can be specifically amended to include or remove certain elements.

Adhesion Insurance Contract Example

Let’s look at an example of an adhesion insurance contract to better illustrate the topic.

Imagine that you are looking to buy life insurance.

You approach an insurance company that provides you with a questionnaire to complete to decide whether or not to give you coverage and for how much.

Following your medical exam, the insurance company decides to give you life insurance coverage for $50,000 based on very strict terms.

Since the adhesion life insurance is non-negotiable, you essentially have to decide if you are going to take it or leave it.

You pretty much have two options, accept the insurance policy as is or reject it entirely.

Contract of Adhesion Insurance Takeaways 

So there you have it folks!

What is an adhesion insurance policy?

Who can modify a policy of adhesion? 

In this article, I looked at the adhesion definition in insurance in general and how insurance contracts work.

A contract of adhesion, also be called a standard form contract or boilerplate contract, is a type of contract that is drafted by one party and imposed on the other party.

The drafting party is generally the party with the strong bargaining power whereas the other party is typically is confronted with a choice to accept the contract as drafted or refuse it altogether.

It’s common to see adhesion contracts in certain industries or relating to certain transactions, such as:

  • Insurance policies
  • Car purchase agreements
  • Lease agreements
  • Mortgage agreements
  • Consumer credit agreements

An insurance policy of adhesion is characterized as follows:

  • The insurance company has significant negotiating power 
  • The insured is given a “form” contract or boilerplate contract to accept or walk away
  • The contract is drafted by the insurance company
  • The terms of the contract are one-sided and benefit the insurance company
  • The insurance company defines the terms, coverage conditions, premiums and all essential aspects of the contract

It’s important to note that the courts do recognize adhesion contracts but will scrutinize them more than mutually negotiated contracts to ensure they are fair and represent the will of the parties.

The courts use the “reasonable expectation doctrine” to assess the insurance adhesion agreements to ensure that the insured reasonably expected the terms found in the policy.

I hope I was able to help you better understand adhesion in insurance, why insurance contracts are said to be contracts of adhesion, and how it works.

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Now, let’s look at a summary of our findings.

Adhesion Insurance Meaning

  • An adhesion insurance contract is an insurance contract where the insurance company, having a significant power advantage over its client, unilaterally sets the terms of the insurance policy 
  • Most insurance contracts are “adhesion contracts” as the insurance company defines the terms, sets the limits, establishes the coverage terms, and outlines the premium it needs to receive 
  • The main reason why insurance contracts are of adhesion type is to ensure that the company can manage all the policies and policyholders efficiently, reduce transaction costs, and accelerate the contracting process 
  • The key characteristics of an insurance adhesion is that the contract is generally a “boilerplate”, signed between parties with different bargaining power, and drafted on a one-sided basis 
Aleatory contract
Amended and restated 
Boilerplate contract 
Business lawyer 
Conditional contract
Contract of adhesion 
Contract lawyer 
Contractual risk
Express authority 
Form contract 
Incontestability clause 
Indemnity insurance 
Insurable interest 
Insurance claim 
Meeting of the minds 
Named insured 
Other insurance clause
Parol evidence rule 
Property insurance 
Purchasing power 
Take it or leave it contract
Editorial Staff
Hello Nation! I'm a lawyer by trade and an entrepreneur by spirit. I specialize in law, business, marketing, and technology (and love it!). I'm an expert SEO and content marketer where I deeply enjoy writing content in highly competitive fields. On this blog, I share my experiences, knowledge, and provide you with golden nuggets of useful information. Enjoy!

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