You’ve likely heard of insurance companies with the word "mutual" in their name. The term describes an important element of their business model. Here's an overview of what it means to be a mutual insurance company and how you could benefit from this option.
Policyholders Own Mutual Insurers
Many insurance companies are owned by shareholders of their stock. Mutual insurance companies, however, are owned by policyholders. This means mutual companies cannot go public, at least not while holding that title. If a company decides to sell shares to access capital, they get “demutualized,” which means they are no longer owned by policyholders and become stock insurers.
Mutual insurance companies are formed by groups with a common need for insurance, like those of a particular profession or in a specific city or region. Those individuals or businesses purchase policies, and their contributions fuel the operating costs, so the company does not rely on outside capital.
Mutual Insurers Offer Affordable Policies
Since mutual insurers do not answer to shareholders, they can make business decisions with only the best interests of policyholders in mind. That generally leads to low prices, and many customers purchase policies at or slightly above the insurer’s cost.
These companies invest in funds like other firms, but the profits are either reinvested or distributed among policyholders instead of offering dividends to shareholders. Since they are under no pressure to turn large profits, they often invest in low-risk funds to keep costs manageable while ensuring low prices and moderate returns for policyholders.
If you are looking for a mutual insurer, turn to Baldwin Mutual Insurance Company in Foley, AL. Established more than 100 years ago, they provide property insurance to residents throughout Baldwin County. They offer an array of policies, including those for homeowners, renters, and farmers. Visit the website or call (251) 943-8526 to speak with an agent.
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