What type of companies are owned by policyholders who receive non-taxable dividends?

The correct choice is mutual companies, as these are owned by the policyholders themselves. In mutual insurance companies, policyholders are essentially the owners, which allows them to share in the profits of the company. When the company performs well financially, it can distribute dividends to policyholders, which are not subject to taxation. This structure aligns with the mutual ethos of providing value and benefits directly back to those who invest in the company through their premium payments.

In contrast, stock companies are owned by shareholders and their primary goal is to generate profit for those shareholders, not necessarily for policyholders. Fraternal benefit societies are nonprofit organizations that offer insurance to members who share a common bond, but they do not operate on the same profit-sharing model as mutual companies. Government insurers are typically public entities providing insurance, often with specific regulatory or social objectives and do not operate for profit, nor do they provide dividends to policyholders. Thus, the structure of mutual companies uniquely allows policyholders to receive non-taxable dividends as a return on their investment in the company.