What is the primary difference between a mutual insurance company and a stock insurance company?

A mutual insurance company and a stock insurance company differ fundamentally in their ownership structures. A stock insurance company is owned by its shareholders, who have bought shares in the company. These shareholders may or may not be policyholders and are primarily focused on earning a return on their investment. In contrast, a mutual insurance company is owned by its policyholders, which means that those who purchase insurance policies also have a stake in the company.

This ownership structure influences how profits are distributed. In stock insurance companies, profits are typically returned to shareholders in the form of dividends, while mutual companies may distribute profits to policyholders in the form of dividends or reduced future premiums. Understanding this distinction is essential for anyone studying for a Florida 2-14 Life Insurance License, as it affects how both types of companies operate and serve their customers.