A fraternal benefit society differs from a stock life insurance company primarily in that it:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A fraternal benefit society is a nonprofit organization, typically organized around a common bond such as religion, ethnicity, or occupation, that issues insurance contracts to its members. It operates under a representative form of government and, like all insurers, is subject to state regulation; in California, fraternals are governed by their own chapter of the Insurance Code. Unlike a stock insurer, there are no shareholders seeking profit, and surplus is used for the benefit of the society and its members. Fraternals do collect premiums and pay benefits, and they are not exempt from regulation.
Why the other options are wrong
- B) Fraternal societies do collect premiums and pay benefits to members; insurance is a core purpose of the society.
- C) Fraternals are subject to state regulation, including solvency and market conduct rules.
- D) Fraternals operate within the United States, including California, under dedicated statutory provisions.
Memory hook
Fraternal = a club that insures its own members, nonprofit and regulated like any insurer.