Life Insurance Companies: Definition & Types

Instructor: Yuanxin (Amy) Yang Alcocer

Amy has a master's degree in secondary education and has taught math at a public charter high school.

When it comes to selecting a life insurance policy, you have two types of companies to choose from. Learn what these two types are and what makes them different.

Life Insurance

In this lesson, we'll talk about the two types of companies from which you can get life insurance. Each has a different set of features. Let's say you are considering purchasing life insurance, if not for yourself, then for a family member. You begin researching and you find that there are several companies out there that offer life insurance policies. But, how do you choose which company to go with? Let's talk about the two different business types.

Stock Insurance Company

A stock insurance company is a company that sells stock either directly to stockholders or through the stock market. Only stockholders have a voice in the company. If you purchase a policy from this type of business, you won't have a say in the corporation unless you also buy stock in the company. Policyholders are not required to purchase stock in the company.

Mutual Insurance Company

A mutual insurance company, on the other hand, is a company where all its policyholders are its owners. This means that if you purchase a policy from a mutual insurance company, you automatically are also buying into the company and become voting owners of the company with a say as to how the company is run. You also get to vote on who will become a member of its board of directors.

Participating and Non-Participating Policies

Along with these two different company types, you also have two different major types of whole life insurance policies you can choose from. You can choose from either participating or non-participating policies. A participating policy is one that pays you dividends while a non-participating policy is one that doesn't you pay anything. With a participating life insurance policy, you can choose to receive your dividends either in cash or as a discount on your premiums.

Usually, participating policies are sold by mutual insurance companies while non-participating policies are sold by stock insurance policies. But some stock insurance policies also offer participating plans.

To unlock this lesson you must be a Study.com Member.
Create your account

Register to view this lesson

Are you a student or a teacher?

Unlock Your Education

See for yourself why 30 million people use Study.com

Become a Study.com member and start learning now.
Become a Member  Back
What teachers are saying about Study.com
Try it risk-free for 30 days

Earning College Credit

Did you know… We have over 200 college courses that prepare you to earn credit by exam that is accepted by over 1,500 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.

To learn more, visit our Earning Credit Page

Transferring credit to the school of your choice

Not sure what college you want to attend yet? Study.com has thousands of articles about every imaginable degree, area of study and career path that can help you find the school that's right for you.

Create an account to start this course today
Try it risk-free for 30 days!
Create an account
Support