Final answer:
A mutual insurance company is organized to return any surplus money to its policyholders. The type of insurance company organized to return any surplus money to its policyholders is known as a mutual insurance company.
Step-by-step explanation:
The type of insurance company organized to return any surplus money to its policyholders is known as a mutual insurance company.
Unlike stock insurance companies which are owned by shareholders and operated for their profit, mutual insurance companies are owned by the policyholders themselves. This means that any profits or surplus made by the mutual insurance company are returned to its policyholders in the form of dividends or reduced premiums.
An example of a mutual insurance company is State Farm Insurance, which operates on a mutual ownership structure.
A mutual insurance company returns surplus money to its policyholders, typically through dividends or reduced premiums. This form of insurance serves as a money-back guarantee and contrasts with for-profit insurance firms, which aim to earn profits for shareholders.
The type of insurance company organized to return any surplus money to its policyholders is known as a mutual insurance company. In this arrangement, policyholders make regular payments to the insurance entity, which covers financial losses from certain events. If the insurance company has leftover funds from premiums and investment income, after paying out claims and covering expenses, this surplus is returned to the policyholders, often in the form of dividends or reduced future premiums.
This contrasts with for-profit insurance companies, which aim to make profits for shareholders. A mutual insurance company operates as a money-back guarantee for its policyholders. However, the presence of insurance can also create a moral hazard, as individuals may take greater risks, knowing they are protected against certain losses.