Colorado Life Producer License Practice Test

When an insured may reject the policy altogether or accept it, this is called?

1. Adhesion

2. Acceptance

3. Ratification

4. Revocation

The correct answer is: Adhesion

The situation described, where an insured has the choice to reject or accept a policy, is best termed as adhesion. This principle originates from the nature of insurance contracts, which are typically drafted by one party (the insurer) and presented to the other party (the insured) on a take-it-or-leave-it basis. The insured does not have the opportunity to negotiate terms and must fully accept or reject the contract as it is presented. This concept underscores a significant aspect of contract law, where the insured is not involved in creating the contract's terms, leading to a lack of bargaining power. Therefore, a policy based on adhesion stipulates that the insurer bears the risk of any ambiguous terms, as the insured is assumed to have no input in their formulation. The other concepts, such as acceptance, ratification, and revocation, do not capture the essence of the scenario where the insured must choose between outright rejection or acceptance without negotiation. Acceptance generally refers to agreeing to the terms presented, while ratification is about confirming a prior act. Revocation pertains to withdrawing consent or a previously granted right, which does not align with the context of deciding on an insurance policy acceptance.