State RegulationsFL specificDifficulty 2/5
A Florida mutual insurance company differs from a stock insurance company primarily because:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Under Chapter 628, Florida Statutes, a mutual insurer is owned by its policyowners, who generally elect the board of directors and may receive dividends out of surplus; a stock insurer is owned by its shareholders, who elect the board and may receive dividends declared out of profits. Both forms may write life and health insurance, and either may be domestic, foreign, or alien. For the exam, the ownership difference is the key distinction between the two forms.
Why the other options are wrong
- B) Corporate form does not restrict product lines; both mutual and stock insurers may write life and health insurance in Florida.
- C) Either form may be domestic, foreign, or alien depending on where it is organized; ownership form and place of organization are unrelated.
- D) Directors of both are elected by their owners - policyowners for a mutual, shareholders for a stock company - not appointed by regulators.
Memory hook
Mutual: policyowners vote; stock: shareholders vote.