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The Curious Bag
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Life insurance companies operate under either a stock or mutual formation. Most commonly, life insurance companies are mutuals.
Definition
Mutual life insurance is coverage issued by a company operating under a mutual formation. The policy is no different than a life policy issued by a stock company, but the insured's business relationship with the company is different.
Ownership
Each policyholder has ownership rights in a mutual life insurance company. Unlike a stock insurance company, the ownership does not rest with private stockholders.
Management
A mutual life insurance company is managed by a board of directors. Members of the board are elected by the policyholders, giving insureds a voice in the decision-making process of the company.
Dividends
If a mutual life insurance company earns a profit, it pays a portion of these profits to policyholders in the form of dividends. Dividends can be paid directly to policyholders or credited toward an insured's future policy premiums.
Disclosures
A mutual life insurance company provides policyholders with quarterly or yearly financial disclosures, including profit-and-loss statements, investment performance and operating expenses.
Source:
CLHIA: Glossary of Insurance Terms
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