Men can associate for any legal purpose, and mutual protection against loss by fire is one of these.
In many neighborhoods throughout the country, but particularly in the eastern states, there are mutual insurance companies, usually composed of a number of men who know each other and who agree to share the losses of a member, in proportions agreed to in advance.
This form of insurance is cheap and effective, but the field of its operations is necessarily limited.
STOCK COMPANIES
The stock companies start with a fixed capital, each member receiving stock in proportion to the amount contributed.
The capital and the interest from it, after paying the necessary expenses, is invested, and reinvested, till it often reaches a large sum.
At the end of every fiscal year, usually June 30th, the expenses and the losses paid are deducted from the earnings and the net gain may be divided as dividends.
Often there are not only no dividends, but a great conflagration, like that of San Francisco, may wipe out all the earnings, all the reserve and even the capital itself, leaving the company bankrupt and heavily in debt.
Great calamities cannot be foreseen. No actuary has yet appeared to forecast the acts of Providence, but on the whole our fire insurance companies are well managed and prosperous.