Arkansas Life and Health Insurance Practice Exam

A contract that is drafted by an insurer with no input or alteration from the insured is known as a(n):

1. Contract of Adhesion

2. Contract of Mutual Consent

3. Contract of Negotiation

4. Contract of Warranty

The correct answer is: Contract of Adhesion

A contract that is drafted by an insurer with no input or alteration from the insured is known as a Contract of Adhesion. In such contracts, the insured is in a position of less power compared to the insurer, leading to terms that are typically more favorable to the insurer. This type of contract is offered on a "take it or leave it" basis, with the insured having little to no ability to negotiate or modify the terms. "Contract of Mutual Consent" refers to a contract where both parties have reached an agreement on its terms. "Contract of Negotiation" refers to a contract where parties engage in negotiations to reach mutually agreeable terms. "Contract of Warranty" relates to a type of contract wherein the insurer guarantees the truth of certain statements or promises made by the insured.