Adhesion insurance is a form of insurance coverage designed to offer protection to individuals and businesses against legal liabilities that come from agreements or contracts they take up.
It offers protection in case an involved party does not fulfill their obligations in the contract or agreement, causing the other party to experience financial losses.
Equally important, adhesion insurance is a good form of coverage in events where there is an imbalance or unequal power between the parties involved in the agreement, like in contracts with government entities or large corporations.
How Does It Work?
Here is what you need to know. When a person or an individual enters an agreement, they might need to buy an adhesion insurance policy to safeguard themselves against possible breaches of contract by the other involved party.
However, if a breach takes place, the policyholder can file a claim with their insurance company, which will be responsible for investigating the claim and giving financial reimbursement if the breach is proven.
This reimbursement can help cover any financial loss suffered as a result of the breach, like additional expenses or lost revenue.
What Does Adhesion Insurance Cover?
A broad range of contractual liabilities and obligations are usually covered by adhesion insurance. Some of them include:
- Delayed performance.
- Non-performance.
- Legal expenses.
- Breach of contract.
What Are Its Exclusions?
Although this type of insurance covers a wide range of contractual liabilities, there are specific exclusions that might be applied by the policy’s term and insurance company:
- Criminal acts.
- Intentional breaches of contract.
- Acts of war or terrorism.
- Pre-existing disputes.
Who Needs a Policy?
Adhesion insurance is beneficial for individuals and businesses that engage in agreements or contracts where there is a risk of financial loss as a result of breaches of contract. So, consider this form of insurance if you are:
- Contractors and subcontractors.
- Large corporations.
- International trade and commerce industries.
- Real estate professionals.
- Small businesses.
How Much Does Adhesion Insurance Cost?
The cost of an adhesion insurance policy can differ based on the level of coverage required, the nature of the contract, and the risk profile of the potential policyholder.
Meanwhile, insurance companies usually evaluate these factors when they are trying to determine the policy’s premium.
Individuals and businesses can purchase a policy from different insurance providers to compare the coverage options and rates before choosing a quote that meets their budget and needs.
How to Get Adhesion Insurance
Obtaining adhesion coverage involves different steps to make sure that you end up getting the perfect coverage for your needs. Here is a step-by-step guide you can use to carry out this process:
- Assess your needs.
- Research insurance providers.
- Gather policies.
- Review the policy terms.
- Personalize your coverage.
- Buy a policy.
- Adhere to the terms of the policy.
After you successfully purchase a quote, you have to stay informed about any changes and updates to your quotes to ensure ceaseless coverage.
Frequently Asked Questions
Is adhesion insurance the same as professional liability insurance?
No, adhesion insurance is not the same as professional liability insurance. Adhesion insurance offers coverage for contractual liabilities that happen when there are breaches of contract. On the other hand, professional liability insurance covers errors, omissions, and claims of negligence in the professional workspace.
Can adhesion coverage be tailored to specific industries or types of contracts?
Certainly, insurance companies might provide personalized coverage options tailored to meet the needs of certain contractual arrangements or industries, like supply agreements or construction contracts.
Does adhesion insurance cover losses resulting from economic downturns or market fluctuations?
Unfortunately, adhesion insurance does not offer coverage against losses from economic factors beyond the control of the contracting parties. For instance, fluctuations in commodity prices or changes in market demand.
Can adhesion coverage be purchased for existing contracts or only for future contracts?
Adhesion insurance quotes can be bought for both existing contracts and future contracts. However, the coverage for existing contracts may require underwriting review, and the premium amount may be changed based on the parties involved, any existing disputes, and the length of time remaining on the contract.
How do I file a claim under my adhesion coverage policy?
To file a claim under your adhesion insurance policy, you need to reach out to your insurance provider to start the claims process.
Once you have submitted your claim and the supporting documents, your insurance provider will assess it and carry out an investigation. If everything goes smoothly, you will receive a reimbursement or compensation.
