Q: What is a “Fraternal Benefit Society”?
Fraternal Benefit Societies were developed in the 1800s as a way for people -- many of them immigrants who were new to the United States -- to work alongside those with common ethnic, religious, and other backgrounds. The nonprofit organizations provide "mutual aid" to individuals and families. That includes insurance against death, disability, and illness (traditional offerings of any life insurance agent's business) but also involves a lodge system where members -- policyholders and their families -- meet for social and charitable events.
According to the American Fraternal Alliance (AFA), an organization that represents 73 fraternal benefit societies in the U.S. and Canada, these societies raised nearly $17 million in the wake of the Sept. 11 attacks and more than $17 million in donations and materials for victims of hurricanes Katrina, Rita, and Wilma. In 2006, fraternal benefit society lodge members donated nearly 95 million volunteer hours, worth an estimated $1.6 billion.
But despite their additional offerings and not-for-profit status, fraternal benefit societies are still bound by traditional insurance regulations. They must be licensed with the insurance departments of the states in which they operate and must comply with state and federal laws governing insurance transactions.