PSI Ohio Insurance Practice Exam

What is a fraternal benefit society?

1. An organization that provides healthcare plans

2. A group that provides life insurance benefits to its members

3. A union of employees offering retirement plans

4. A social club with no financial benefits

The correct answer is: A group that provides life insurance benefits to its members

A fraternal benefit society is primarily characterized by its provision of life insurance benefits to its members. These organizations operate on a mutual basis, meaning that they are formed by a group of individuals who share a common bond, such as religion, ethnicity, or occupation. The main purpose of a fraternal benefit society is to offer social, charitable, and insurance benefits to its members. Members typically pay dues or premiums that are then pooled to provide coverage, allowing the society to support its members financially during times of need, such as in the event of death. Unlike healthcare plans, employee unions, or purely social clubs, fraternal benefit societies are structured to provide specific financial benefits, particularly related to life insurance. The focus on life insurance distinguishes them from organizations that might focus on retirement plans or other benefits without offering life insurance coverage. Thus, the definition and function of a fraternal benefit society are best encapsulated in the idea that it provides life insurance benefits to its members.