Insurance is generally a topic that people don’t like to think about until they need it. Who can blame them, right?
People also don’t know that the law has 9 different categories of companies. These categories are not derived from the products that the company sells. So when you say life insurance company or health insurance company, you are simply indicating the type of product that the company sells. You are not talking about its legal structure.
The 9 types of insurance companies are:
1. Domestic – This type of insurance company is constituted and constituted in accordance with the laws of the state in which it is domiciled. For example, a company incorporated in California is a California national and a foreign national of the other states.
2. Foreign: This type of insurance company is also a national company, since it is domiciled in one state but is licensed to do business in another state. For example, a California-domiciled company doing business in Nevada is foreign to Nevada but can do business in Nevada because it meets the licensing requirements.
3. Foreign: This type of insurance company is often confused with a foreign insurance company. The Alien company is one that is formed under the laws of a country other than the United States. For example, a company organized under the laws of Canada and operating in the United States would be a foreign company in this country. However, if you have the proper license, you can operate in the United States.
4. Authorized (Admitted) and Unauthorized (Not Admitted) – Upon requesting approval to do business in a state, the insurance company receives a certification of authority from the state Department of Insurance (Division). Once they receive this certificate, they are known as an admitted or licensed company. Companies without a certificate of authority are known as unsupported or unauthorized companies. A note of caution before purchasing insurance. You should always know if the company is admitted / licensed. Otherwise, your claim may not be honored.
5. Corporation: As the name implies, a corporation is an insurance company owned by shareholders. These holders own the capital stock of the company and most are listed on an organized stock exchange.
6. Mutuality: this type of company is owned by the people and / or companies that insure the company.
7. Reciprocal (appraisal) company: Unincorporated associations of individuals or companies, called underwriters, participate in cooperative insurance programs. Each policyholder is insured by everyone else and each insures the others. Coverage is reciprocally traded.
8. Fraternal benefit society: this type of social organization has statutes that allow it to sell insurance to its members. The company has no capital stock, is non-profit, and is organized for the benefit of the members.
9. Lloyd’s Insurer – Lloyd’s is a household name and most people think of it as an insurance company. The truth is that it is not. It is a number of people organized in unions or groups with the purpose of underwriting risks. Lloyd’s operates on many of the same principles as a stock exchange, linking buyers who want to insure insurance with sellers who want to underwrite risks.
By the way, each insurance company sets its own rates and you must first get approval from the Insurance Commissioner of the state you want to sell in. This is why you can get a huge disparity in premium quotes for the same coverage. It is worth buying at the best possible price BEFORE buying any type of insurance.