Which statement about contracts of adhesion is true?

• A. A prospective policyowner has the right to reject the contract.
• B. Both parties to the contract are required to draft the contract together.
• C. The contract terms can be altered by the policyowner.
• D. State laws invalidate insurance contracts that are contracts of adhesion.

Answer: (A)

Contracts of adhesion are standardized, take-it-or-leave-it agreements drafted by one party (the insurer) and accepted by the other (the policyowner). The key point tested here is that the policyowner has the option to reject the contract if the terms aren’t acceptable, since there isn’t room to bargain over the wording. If the terms don’t suit the applicant, they can walk away rather than sign.

The other statements don’t fit: the contract isn’t drafted jointly by both parties, so there isn’t a collaborative drafting process; once accepted, the policy terms aren’t typically movable by the policyowner; and state laws don’t invalidate adhesion contracts but regulate them to ensure fairness and proper disclosures.