Which statement about mutual and stock insurers is true?

• A. Mutual insurers are owned by policyowners
• B. Stock insurers are owned by policyowners
• C. Mutual insurers are for profit
• D. Stock insurers distribute profits to policyowners

Answer: (A)

In a mutual insurer, policyowners actually own the company. They have voting rights and can share in the company’s profits, typically through policy dividends or reduced premiums. That makes the statement true: mutual insurers are owned by policyowners.

Stock insurers, on the other hand, are owned by stockholders who buy shares in the company. Profits go to those stockholders as dividends, not to policyowners.

The idea that mutual insurers are for profit and the idea that stock insurers distribute profits to policyowners are not defining truths about ownership. Mutuals return value to policyowners, while stock insurers’ profits go to their shareholders.