How are insurance contracts typically structured in relation to the policy owner?

Insurance contracts are typically structured on a take it or leave it basis, commonly referred to as a "contract of adhesion." This means that the insurer provides the terms and conditions of the policy, and the policy owner must accept these terms as they are presented. The policy owner generally does not have the power to negotiate the language, conditions, or coverage limits of the contract, which results in a standard format that is uniform for all policyholders.

This structure reflects the nature of insurance as a product where the insurer holds more bargaining power, given their expertise and the resources at their disposal to create such contracts. As a result, policy owners often have limited flexibility in changing the terms to fit their specific needs or circumstances, reinforcing the notion that they must either accept the entire policy as is or forgo purchasing it altogether.

In contrast, the other options suggest some level of flexibility or negotiation that is not characteristic of standard insurance contracts. For instance, a negotiable basis implies terms can be altered, which typically isn’t the case; a customizable basis suggests that policyholders can tailor their coverage extensively, which is generally not provided within the standard offerings of most insurers; and an open-ended basis would indicate that terms can be indefinitely changed or revised, which does not