What characterizes a mutual insurance company?

A mutual insurance company is characterized as being owned by its policyholders rather than by stockholders. This structure means that policyholders have a direct interest in the company’s financial performance and may benefit from profits in the form of dividends or reduced premiums, as these profits are typically reinvested into the company for the benefit of the policyholders. Unlike stockholder-owned companies, where the primary goal is often to maximize profit for shareholders, mutual insurance companies prioritize the interests of their members, aligning with the principles of mutuality.

In contrast to the other options, a mutual insurance company does not exist solely to serve non-profit organizations, nor is it managed by a government agency. This distinct ownership structure plays a crucial role in how these companies operate and their overall mission to provide insurance solutions tailored to the needs of their policyholders.