Mutual Insurance Companies: Choosing the Right One

Investing in the insurance sector seems like the surefire route to riches in today’s world. After all, everyone needs some form of insurance policy in case the unexpected happens. Some of the common ones include insurance on homes, life, health, and kids’ education. There are different routes for companies aiming to invest in the insurance sector, though most opt to be captive or mutual insurers.

While setting up and running your company seem foolproof, several things could go wrong without a mutual or captive insurance lawyer to guide you. For instance, people assume that captive and mutual insurers are the same. A captive insurance agency will be entirely owned and run by its insured. It insures the owners’ risks, and they benefit from the underwriting profits. Policyholders also own and control a mutual insurance agency. Unlike in a captive insurance agency, however, the policyholders are only asked to vote, often by proxy, on matters requiring their action. Since the policyholder has not invested any of their own capital like they would in captive insurance, they will not actively participate in the company’s running. Moreover, the insured’s ownership status comes to an end at the expiry of their policy. The following are the types of mutual insurance companies.

Assessment Mutual Insurers

These have the right to charge a higher premium to their insured if their expenses and losses are more than they expect. Assessment mutual insurers are not so common since this arrangement will place their policyholders’ investment at considerable risk. It is also quite challenging to collect the premiums in this type of mutual insurer setup.

Advance Premium Mutual Insurers

These resemble assessment mutual insurers since policyholders own them. However, advance premium mutual insurers will not charge assessments if they expect greater losses. They will nonetheless pay for the excessive losses out of their surplus, or the difference between their liabilities and assets, and they tend to charge a higher premium than necessary. These premiums will be returned to the policyholders as returns at the end of their policy period. Most life insurance companies are set as advance premium mutual companies.

Factory Mutual Insurers

These are commercial property insurers that will insure sites meeting various construction and safety regulations. The company is so called since it insures industrial and factory sites and will carry out periodic inspections and offer loss control services that avert the insured’s risk. The company, in this case, will pick their insured carefully and opt for those who meet certain specifications. To this end, they will offer them far cheaper premiums compared to other insurers.

Fraternal Insurers

Corporate meeting

These companies offer health and life insurance to specific religious and social organizations. These organizations are typically considered charitable organizations by the government. As such, fraternal insurers are not subject to state premium or federal income taxes.

With the many organization options for your insurance companies, it is very easy to pick the wrong structure for your company without a legal expert’s input. You cannot afford to lose the money your policyholders entrust to you because you want to cut back on the costs of hiring a competent legal team.  Getting the best insurance attorney will help you safeguard your profits in the complicated world of insurance.


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