Advance Premium Mutual

DEFINITION of Advance Premium Mutual

An advance premium mutual insurance company that surveys premiums in advance at an amount that doesn't change for a stated period of time. This is not the same as an assessment insurer which evaluates policyholders their premiums in light of real loss and expense experience of the company.

BREAKING DOWN Advance Premium Mutual

Advance premium insurers and assessment insurers are explicitly recognized in different state laws and have different statutory requirements in the operation of their businesses. Mutual companies are likewise some of the time alluded to as cooperatives. A mutual insurance company is owned by policyholders. The sole purpose of a mutual insurance company is to give insurance coverage for its individuals and policyholders, and its individuals are given the right to choose management. Federal law, instead of state law, decides if an insurer can be classified as a mutual insurance company.

Operating Structures

This type of insurer is not normal for an assessment mutual, which can charge higher premiums assuming claims and expenses are greater than projected. An assessment mutual is a rare structure for an insurer in light of the fact that extra premiums or duties might be difficult to collect once the coverage as been given.

The more normal structure is the advance premium mutual. In this case, higher premiums or demands aren't looked for approaches currently in force. Any higher than expected losses or expenses can be paid for out of its surplus, which is the difference among pay and expenses. The insurer would survey the premium for future reestablishments and make any increments around then. Under this type of insurer, excess surpluses, if any, can be returned either as a payout to individuals or as a diminished premium.

Different types of mutual insurers are called friendly societies and operate outside the U.S. A friendly society, otherwise called a mutual society, generous society, or fraternal association is a mutual association set up for insurance, pensions, savings or cooperative banking. Like advance premium insurers, individuals make up any losses and share in dividends.

Fraternal mutuals are mutual insurance companies that give life and accident and medical coverage to individuals who are individuals from social or strict organizations. A portion of these may operate under the umbrella of bigger insurance companies.

Processing plant mutuals were initially settled as commercial property insurers to guarantee production lines and industrial destinations. These mutuals appeared in certain industries where the cost of insurance is high and special aptitude is expected to grasp the business and its risks.