Glossary
Trust Account
A segregated bank account where an insurance agency holds premiums collected from clients on behalf of carriers. Strictly regulated and not commingled with agency operating funds.
Insurance agencies operate as fiduciaries when they collect premiums from clients. The money belongs to the carrier (less commission) until it's remitted — so it must be held in a separate trust account, not in the agency's operating funds.
Most state insurance departments require agencies to maintain a trust account and demonstrate that it always contains at least the amount they owe carriers. Failing to maintain trust account compliance can result in fines, license suspension, or in extreme cases, criminal charges.
Trust account compliance is closely tied to premium reconciliation: you can't know whether your trust account balance is correct until you've reconciled what each carrier is owed.
See also
- Premium Reconciliation — The process of matching the premiums collected by an insurance agency to the deposits and commission statements received…
- Fiduciary Accounting — Accounting performed by an entity holding funds on behalf of another party. Insurance agencies act as fiduciaries when c…