Which of the following represents an essential characteristic of fraternals in insurance?

The answer correctly identifies that fraternals in insurance operate under a charter from state law. Fraternal benefit societies are organizations that provide insurance and other benefits to their members, often based on a social or fraternal connection. They are established as non-profit entities under specific regulations that allow them to serve their members while adhering to state laws regarding their operation.

Operating under a state charter ensures that these organizations meet certain legal requirements, which can include maintaining reserve funds, filing financial statements, and ensuring that their operations are transparent and accountable to members and regulatory bodies. This characteristic is fundamental because it legitimizes their business practices and protects the interests of their members.

The other aspects, while they may pertain to different types of insurance organizations, do not specifically apply to fraternals. For instance, while some insurance entities aim for profit maximization, fraternals often operate as non-profits. Additionally, not all fraternals are required to pay dividends to policyholders; they may provide benefits in other forms. Lastly, fraternals often offer a variety of products beyond just life insurance, including health and other forms of coverage, and are not limited to offering only life products.