State RegulationsTN specificDifficulty 2/5
A Tennessee producer "borrows" money from the premium account to cover office rent, planning to repay it before the insurers' billing date. What is the status of this practice?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
T.C.A. § 56-6-116 makes a producer a fiduciary with respect to premium funds received in the insurance business. Diverting those funds to pay rent — even with a plan to repay quickly — converts trust money to personal use, which is the classic fiduciary violation Tennessee regulators discipline, up to suspension or revocation of the producer's license.
Why the other options are wrong
- B) Prompt repayment does not cure the breach; the duty is to keep fiduciary funds intact, not to borrow them temporarily.
- C) Titling the account in the agency's name does not change the fiduciary character of the premium money held under T.C.A. § 56-6-116.
- D) An office manager has no authority to authorize the personal use of fiduciary funds, and consent would not cure the breach.
Memory hook
Rent money is never premium money — fiduciary funds stay put.