Tennessee Insurance Practice Exam

A policy of adhesion can only be modified by whom?

1. The policyholder

2. The insurance company

3. A legal representative

4. The state regulator

The correct answer is: The insurance company

A policy of adhesion is a type of insurance contract that is drafted by the insurance company and presented to the policyholder on a "take it or leave it" basis. Because these contracts are written entirely by the insurer, the policyholder does not have the opportunity to negotiate or alter the terms of the policy. This characteristic means that only the insurance company has the authority to make modifications to the policy. The principle of adhesion protects the policyholder, as it prevents insurers from using ambiguous language or terms that might disadvantage the insured. If a need for modification arises, it must be initiated by the insurance company, which understands the contract and its implications fully. Other parties, including the policyholder, legal representatives, or state regulators, do not have the authority to unilaterally change the terms of such a contract.