Types of Insurers

1. Private Insurers include Stock Insurance Companies that:

a. are owned by the shareholders.

b. function to earn a profit for those shareholders who receive the surplus of the company as a taxable dividend.

c. 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:

a. are owned by the policyholders, who elect the board of directors.

b. 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.

The following questions are a review of the content on this page. Answer them and then click below to check your response.

All of the following are characteristics of a mutual insurance company EXCEPT: Pick one A. Management elects the Board of Directors B. The policy owners are the owners of the company C. Dividends, if any, are paid to policy owners D. It must be incorporated in order to operate

A. Management elects the Board of Directors
B. The policyowners are the owners of the company
C. Dividends, if any, are paid to policyowners
D. It must be incorporated in order to operate

 

The stock company's generated surplus is distributed to its S as a taxable D .

"Dividends" in participating policies are considered a return of excess premium and are therefore N T .

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Answers

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

A. Management elects the Board of Directors
B. The policy owners are the owners of the company
C. Dividends, if any, are paid to policyowners
D. It must be incorporated in order to operate

Ans. A. Management elects the Board of Directors

 
The Stock company's generated surplus is distributed to its __ _________as a taxable__ _________.

 

 

Ans. Stockholders, dividend
 

"Dividends" in participating policies are considered a return of excess premium and are therefore _____ ___________.

 

 

Ans. not taxable

 

 

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