Which of the following correctly describes mutual insurance companies?

Mutual insurance companies are organizations that are owned by the policyholders, making them unique in the insurance market. Essentially, when individuals purchase policies from a mutual company, they become members and part owners of that company. This ownership structure means that any profits made by the company can be returned to the policyholders in the form of dividends or reduced premiums, rather than being distributed to stockholders as in stock companies.

This ownership by policyholders allows mutual insurance companies to align their interests closely with those of their insured members and focus on providing value to them, rather than maximizing shareholder profits. The decision-making processes within mutual companies typically emphasize the needs and preferences of the policyholders.

Other options do not accurately capture the nature of mutual insurance companies: stockholders do not own mutual companies, they do not exclusively offer term life policies, and premiums may vary based on the claims experience, so they do not have fixed premiums regardless of claims. All these aspects together serve to differentiate mutual insurance companies from other types of insurance entities.