Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
Which type of insurer is generally associated with issuing nonparticipating life insurance policies, which do not pay policyholder dividends?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Stock insurance companies are owned by shareholders and typically issue nonparticipating policies, under which no dividends are paid to policyholders - profits go to stockholders. Mutual insurers are owned by their policyholders and generally issue participating policies that may pay dividends from surplus. Nonparticipating policies are usually priced lower because no dividend is anticipated. This is the basic participating/nonparticipating distinction in objective LIFE-II.B.1.
Why the other options are wrong
- B) Mutual insurers are policyholder-owned and characteristically issue participating policies that pay dividends.
- C) Fraternal benefit societies are member organizations, not stock companies, and operate on a mutual-like basis.
- D) Reciprocals are owned by their subscribers for other lines, not the standard issuer of nonparticipating life policies.
Memory hook
Stock company, no dividend. Mutual company, dividend check. Owners shape the payout.