Stock VS Mutual Insurance Companies

Insurance sales people love to tell you why the insurance companies they represent are the best. Some agents will extol the virtues of being a publicly-held-a.k.a. stock-company. Others will tell you how lucky you will be to have your insurance with a mutual insurance company.

The reality is that the financial health of the company and its operating record in the state where you live are far more important guideposts than whether it's a stock or mutual company. There are small nuances, though. Here are the differences.

* Stock insurance firms. These companies are owned by one or more investors. When the company makes money, the investors may receive a portion of the profits in the form of a dividend. The company's stock may be traded on a stock exchange. As a policyholder, you do not get to share in the profits.

* Mutual insurance companies. These companies are owned by the policyholders. Thus, when you purchase auto insurance from a mutual company, you become a shareholder of that company. You get to share the profits when there are profits.

Most insurance companies are stock firms. Examples are: Allstate, CNA, and Zurich American.