Minnesota Real Estate Exam Practice Question
An insurer that is owned by its policyholders and can pay annual dividends to them is considered a
Correct Answer: A
Rationale: A mutual company is owned by its policyholders, which allows it to distribute annual dividends based on its financial performance. This structure aligns the interests of the insurer with those of its members, promoting a focus on service rather than profit.
A reciprocal exchange, option B, involves policyholders exchanging insurance contracts but does not operate on a mutual ownership basis.
Option C, a risk retention group, is a liability insurance company formed by members with similar risks, lacking the dividend distribution characteristic.
A stock company, option D, is owned by shareholders who seek profit, not policyholders, and typically does not pay dividends to members.
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