| Insurance is generally a topic people don't like to | | | | caution before buying insurance. You should |
| think about until they need it. Who can blame | | | | always learn if the company is admitted |
| them, right? | | | | authorized. Otherwise, they may not honor your |
| People also don't know that the law has 9 | | | | claim. |
| different categories of companies. These | | | | 5. Stock Company - As the name implies, a stock |
| categories are not derived from the product(s) | | | | company is an insurance company that is owned |
| the company sells. So when you say life insurance | | | | by the shareholders. These holders own the |
| company or health insurance company, you are | | | | capital stock of the company and most are |
| merely stating the type of product the company | | | | publicly traded on an organized exchange. |
| sells. You are not talking about its legal structure. | | | | 6. Mutual Company - This type of company is |
| The 9 types of insurance companies are: | | | | owned by the people and/or businesses the |
| 1. Domestic - This type of insurance company is | | | | company insures. |
| incorporated and formed under the laws of the | | | | 7. Reciprocal (Assessment) Company - |
| state in which it is domiciled. For example, a | | | | Nonincorporated associations of individuals or |
| company incorporated in California is domestic to | | | | business, called subscribers, engage in cooperative |
| California and is foreign to the other states. | | | | insurance programs. Each policyholder is insured by |
| 2. Foreign - This type of insurance company is | | | | all others, and each insures the others. Coverage |
| also domestic company as it is domiciled in one | | | | is exchanged on a reciprocal basis. |
| state but it is licensed to do business in another | | | | 8. Fraternal Benefit Society - This type of social |
| state. For example, a California domiciled company | | | | organization has bylaws allowing it to sell insurance |
| doing business in Nevada is foreign to Nevada but | | | | to its members. The society has no capital stock, |
| can do business in Nevada because it met the | | | | is not for profit, and is organized for the benefit |
| licensure requirements. | | | | of the members. |
| 3. Alien - This type of insurance company is often | | | | 9. Lloyd's Insurer - Lloyd's is a very well known |
| confused with a Foreign insurance company. The | | | | name and most people think of it as an insurance |
| Alien company is the one that is formed under | | | | company. The truth is, it isn't. It is a number of |
| the laws of a country other than the United | | | | people organized into syndicates or groups for the |
| States. For example, a company organized under | | | | purpose of underwriting risks. Lloyd's operate on |
| the laws of Canada and doing business in the | | | | many of the same principles as a stock exchange |
| United States would be an Alien company in this | | | | in that it matches buyers wishing to secure |
| country. However, if it is properly licensed, it can | | | | insurance with sellers who wish to underwrite |
| do business in the United States. | | | | risks. |
| 4. Authorized (Admitted) and Unauthorized | | | | By the way, each insurance company sets its |
| (Unadmitted) - Upon applying for approval to do | | | | own rates and must first get them approved by |
| business in a state, the insurance company | | | | the Insurance Commissioner in the state in which |
| receives a certification of authority from the | | | | they wish to sell. This is why you can get a wide |
| state Insurance Department (Division). Once they | | | | disparity in premium quotes for the same |
| receive this certificate they become known as an | | | | coverage. It pays to shop for the best possible |
| admitted, or authorized, company. Companies | | | | price BEFORE you purchase any type of |
| without a certificate of authority are known as | | | | insurance. |
| unadmitted, or unauthorized, companies. A note of | | | | |