In terms of insurance contracts, what does the term 'adhesion' signify?

The term 'adhesion' in the context of insurance contracts refers to the nature of how these contracts are formed. A contract of adhesion is one where the terms are set by one party (typically the insurer), and the other party (the insured) has little or no ability to negotiate the terms. This means that the wording of the contract is fixed and cannot be altered by the insured. This concept is central to insurance contracts because they are often presented on a take-it-or-leave-it basis, placing the insured in a position where they must either accept the contract as it is or seek coverage elsewhere.

This characteristic is essential for understanding the relationship between insurers and insureds. Insurers typically create standardized policies to streamline their operations and reduce the difficulty of underwriting and claims processing. Given that the insured has no influence over the contract wording, it often leads to the principle that any ambiguity in the policy language should be interpreted in favor of the insured.

The other options do not accurately reflect the meaning of adhesion in insurance contracts. Negotiating terms is contrary to the concept of adhesion, mutual agreement implies an equal bargaining power which does not exist in adhesion contracts, and the ability for an insurer to deny claims is not inherent in the adhesion principle itself. Therefore