A fraternal benefit society is best described as an insurer that:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A fraternal benefit society is an incorporated, nonprofit organization that provides insurance benefits to its members, who typically belong to a lodge, church, ethnic group, or similar association. It operates without capital stock, which distinguishes it from stock insurers, and it is organized around the member organization rather than around investors. Fraternals provide life, health, and annuity benefits to their members under a special regulatory framework that recognizes their nonprofit, member-based character. They are regulated as insurers but are structured differently from stock and mutual companies because their purpose centers on the fraternal or social organization that defines membership.
Why the other options are wrong
- B) Shareholder ownership describes a stock insurance company, which is organized for profit and owned by its investors. A fraternal benefit society has no capital stock and is a nonprofit organization owned by and serving its members.
- C) Fraternals are private, member-based organizations, not government entities. They are funded by member contributions and operate as nonprofit societies, entirely separate from state-operated programs.
- D) Fraternals primarily provide life, health, and annuity benefits to their members, not property and casualty coverage. Their product focus is on life and health protection, consistent with their role as member benefit societies.
Memory hook
A fraternal society insures its own members, not the public.