Which statement best describes a Stock Insurance Company?

Which statement best describes a Stock Insurance Company?

• A. Owned by policyowners
• B. Sells stock and is owned by stockholders
• C. It is a mutual organization
• D. It writes only life insurance

Answer: (B)

The essential idea is the ownership structure. A stock insurance company raises capital by selling ownership shares and is owned by stockholders. Profits belong to those stockholders, not to policyowners, and policies issued by stock companies are typically nonparticipating with limited or no guaranteed dividends to the insured. This is why the description that matches a Stock Insurance Company is that it sells stock and is owned by stockholders. In contrast, being owned by policyowners describes a mutual company, being a mutual organization is the same notion, and writing only life insurance isn’t a defining feature of stock companies, since they can offer multiple lines of coverage.

The essential idea is the ownership structure. A stock insurance company raises capital by selling ownership shares and is owned by stockholders. Profits belong to those stockholders, not to policyowners, and policies issued by stock companies are typically nonparticipating with limited or no guaranteed dividends to the insured. This is why the description that matches a Stock Insurance Company is that it sells stock and is owned by stockholders. In contrast, being owned by policyowners describes a mutual company, being a mutual organization is the same notion, and writing only life insurance isn’t a defining feature of stock companies, since they can offer multiple lines of coverage.