Identification

• Individuals or entities that own stock in a stock company are the company's owners. Policyholders of a mutual insurance company are the owners of the company.
  
  

History

• Insurance is used to spread risk. Life insurance originated in mutual form, where groups of individuals pooled together to share risk.
  
  

Effects

• A policyholder will generally see one major difference between the two forms of organization. Only mutual insurance companies pay dividends. A dividend is a return of premium, based on the mutual company's operating surplus. Mutual companies are not required to pay dividends; they will elect to pay dividends based upon the performance of the company.
  
  

Expert Insight

• The decision to purchase life insurance from a company should be based, in part, on the financial health of the company. From a policyholder's standpoint the ratings, financial stability, and product features and benefits are important determinants of which company to purchase insurance from.
  
  

Types

• An advance premium mutual company returns surplus to the policyholders in the form of a dividend, but cannot assess the policyholders for a loss. Fraternal mutual companies provide insurance to their members; typically these companies are formed by religious or social organizations.