Trust Funds

Question 1

what is earned premium?

Answer 1

the premium collected by an insurance company for the portion of the policy that expired

Question 2

what is unearned premium?

Answer 2

the portion of the policy premium that has not yet been “earned” by the company because the policy still has time to run before expiration

Question 3

what funds would be held in a trust account?

Answer 3

lets say total premium was $1200 for the full year. broker earns 20% commission on entire premium, so $240. the $240 would have to be held in a trust account because technically they havent earned the full premium to get the full commission

Question 4

for money earned by a brokerage by selling insurance to a client to be used for business expenses, then it would be transferred from….

Answer 4

trust account to the general operating bank account

Question 5

brokers and agents owe what type of duty to the insurers they represent

Answer 5

fiduciary

Question 6

definition of fiducuary?

Answer 6

act in trust and in the best, particularly with respect to monetary matters

Question 7

Premiums collected on behalf of the insurer MUST….

Answer 7

-be held in a trust account
-be remitted to insurer in period of time contractually agreed to
-net premium remitted to insurer

Question 8

what is net premium?

Answer 8

gross premium minus commission

Question 9

policy premium less applicable percentage of commission =

Answer 9

net premium