Insurance companies are organized as either stock insurance companies or mutual insurance companies. A stock company is formed and capitalized through the sale of shares of stock. The individuals or entities purchasing the stock are owners of the company and share in the company’s earnings through stock dividends declared by the insurance company.
With respect to mutual companies, the insurance company is owned by its policy owners. Net profits of the company are distributed to the policy owners in the form of dividends rather than to shareholders with a stock insurance company.