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Types of Insurers

Definition: Insurer - A party or company that provides insurance coverage, typically through a contract of inaurance.

  1. Private Insurers include Stock Insurance Companies that:
    1. are owned by the shareholders.
    2. function to earn a profit for those shareholders who receive the surplus of the company as a taxable dividend.
    3. have policyholders who do not participate in the corporations divisible surplus; these policies are known as non-participating or "non-par" policies.
  2. Mutual Insurance Companies are corporations that:
    1. are owned by the policyholders, who elect the board of directors.
    2. the policies participate in the divisible surplus and are therefore called Participating or "par" policies.
Since the mutual company's surplus is the result of more premium income than was necessary for the company to function, the excess premium is returned as a non-taxable dividend.

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The following question is a review of the content on this page. Answer it and then click below to check your response.

All of the following are characteristics of a mutual insurance company EXCEPT: