Which type of insurance company issues participating policies and is owned by policyowners?

The type of insurance company that issues participating policies and is owned by policyowners is a mutual company. In mutual companies, policyholders are considered owners of the company, which means they have a say in certain company decisions and may receive dividends from the profits. These participating policies are significant because they allow policyholders to share in the company's surplus earnings, resulting in potentially lower premiums or additional cash value through dividends.

Mutual companies contrast with stock companies, which are owned by shareholders and primarily seek to generate profits for those shareholders rather than the policyholders. While foreign and domestic insurers refer to the company's charter location (whether they operate in one state or multiple states), they do not inherently define the ownership structure associated with participating policies. Thus, the correct response centers on the characteristics of mutual companies and their relationship with policyowners.