Glossary · Insurance agency commissions
Premium trust account
A premium trust account, also called a premium fund or fiduciary account, is a bank account in which an agency holds premium collected on behalf of carriers or insureds, kept apart from the agency’s own money as state rules or agency agreements require.
What it means
Premium an agency collects on agency bill business generally isn’t the agency’s money until commission is earned; the rest belongs to the carrier, and refunds belong to insureds. Many states treat agents as holding premium in a fiduciary capacity, and carriers’ agency agreements often add their own requirements.
Rules vary by state, including whether a separate account is required, whether interest may be kept, when commission may be withdrawn, and what records must be kept. This entry is general information, not legal or accounting advice. Your state insurance department, your agency agreements and your accountant are the sources to rely on.
How it shows on a commission statement
The account doesn’t appear on a carrier statement, but agency bill statements are paid from it. A reconciled account should, at any time, hold at least what is owed to carriers and insureds.
Example
- Premium received from insured
- $6,000.00
- Net premium remitted to carrier
- −$5,100.00
- Commission moved to operating account
- −$900.00
- Left in account for this item
- $0.00
Common mistakes to check
- Moving commission out before the premium is collected, where your state or agreement doesn’t allow it.
- Return premium owed to insureds left sitting in the account.
- Not reconciling the account to bank statements each month.
- Paying operating expenses from the account.