What type of insurer is owned by policyholders and allows them to participate in dividends?

A mutual company is an insurer that is owned by the policyholders themselves. This structure means that the policyholders have a vested interest in the company, as they not only purchase insurance to protect against risks but also share in the company’s profits. These profits can be distributed in the form of dividends to the policyholders, which is a key distinguishing feature of mutual companies.

This characteristic contrasts with stock companies, which are owned by shareholders and primarily aim to generate profits for their investors, rather than distributing profits to policyholders. While fraternal benefit societies may provide some benefits to their members, they typically do not function the same as mutual companies regarding policyholder ownership and dividend distribution. Commercial insurers, on the other hand, can be either stock or mutual companies but are mostly focused on profit generation rather than dividend distribution to policyholders. Thus, mutual companies specifically represent the model where policyholders can participate in dividends, making this the correct choice.