State RegulationsTX specificDifficulty 3/5
A fraternal benefit society and a mutual insurer are both owned by their members. What feature distinguishes the fraternal benefit society from a mutual insurer under Texas law?
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Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
Under TIC 885.001-.706, what sets a fraternal benefit society apart from other member-owned insurers is the lodge system, the representative form of government, and the limitation of benefits to members and their beneficiaries. A mutual insurer under TIC 801.001 is owned by its policyholders but need not have any lodge structure and may insure anyone it chooses to accept. So when an applicant must join a local lodge or chapter to obtain the coverage, the product is fraternal rather than an ordinary mutual policy.
Why the other options are wrong
- A) Both a fraternal benefit society and a mutual insurer may provide life insurance benefits to their members, so this does not distinguish the two forms.
- B) A fraternal is operated solely for the benefit of its members and their beneficiaries and is not organized for profit; earnings are not distributed to organizers.
- C) A fraternal is regulated under the fraternal provisions of the Texas Insurance Code rather than exempt from the Code, so the exemption claim is wrong.
Memory hook
Member-owned plus a lodge system equals a fraternal; member-owned without lodges equals a mutual.