What type of company is owned by its policyholders?

A mutual company is structured in a way that it is owned by its policyholders. This means that the individuals who purchase insurance from a mutual company also have an ownership stake in the company itself, as they are the ones benefiting from its profits and governance. The policyholders can vote on important company matters, including the election of the board of directors, which allows them a direct role in how the company operates. This is distinct from stock companies, which are owned by shareholders who may or may not be policyholders, emphasizing a difference in ownership structure and beneficiary interests.

In a mutual company, any profits generated are typically reinvested into the company or returned to policyholders in the form of dividends or reduced premiums. This aligns the interests of the company with those of its policyholders, promoting a mutual benefit. Conversely, stock companies operate for the primary benefit of their shareholders, who are motivated by the financial returns on their investment.