Handling Premium Funds, Commissions and Transaction Records

Introduction

When a customer hands you a premium (the price paid for insurance coverage), that money is not yours. You are holding it for someone else, usually the insurer. Nevada law sets out three duties that follow from that:

• how you must hold and pass on other people's money
• who you may pay a commission to, and who may accept one
• what records you must keep, and for how long

This lesson teaches each of these through worked examples, including the dates and dollar amounts you will need to calculate.

By the end, you should be able to:

• Explain what it means to hold premiums as a fiduciary, and recognize misuse of those funds.
• Calculate remittance and cure deadlines and test a trust account for a deficit.
• Decide whether a commission payment, acceptance or sharing arrangement is permitted.
• List the required contents of a transaction record and calculate the earliest date a record may be destroyed.

Before you start: This lesson assumes you know what a producer of insurance is (a licensed person who sells, solicits or negotiates insurance) and what it means for an insurer to appoint a producer. Both are covered in From application to renewal: a producer's licensing lifecycle. The Commissioner of Insurance, Nevada's insurance regulator, is introduced in Nevada's Commissioner: authority, examinations and hearings.

All people, businesses, dates and amounts below are fictional. Commission rates in examples are assumptions made for the arithmetic. They are not Nevada rules.

Other People's Money: The Fiduciary Duty

A fiduciary is someone trusted to hold and look after something that belongs to another person. In plain terms, you are the caretaker of the money, not its owner.

In Nevada, any money belonging to others that a producer receives under an insurance policy is held in a fiduciary capacity. The same rule covers surplus lines brokers, motor club agents and bail agents. It also covers anyone acting as one of these, licensed or not.

The rule has a hard edge. If a person diverts or appropriates fiduciary money to their own use, Nevada law calls that embezzlement. To divert or appropriate money means to redirect it to your own purposes.

Example. Producer Avery Lin collects a $1,200 premium on Monday. Rent is due, so Avery pays the rent with it and plans to send the insurer $1,200 from next week's income.

Avery has used money that belonged to others for a personal purpose. A plan to repay does not change who owns the money. The rule contains no exception for "borrowing" fiduciary money and putting it back later.

Tempting mistake: thinking the money becomes yours once it is in your hands. Receiving it makes you its caretaker. It does not make you its owner.

Two Ways to Handle Money You Don't Send Right Away

To remit means to send money on to the person entitled to it. The simplest choice is immediate remittance: you send the money on right away.

A producer who does not remit immediately must choose one of two methods for each insurer or other person whose money they receive. That insurer or person is called the principal, meaning the party you are acting for. Once chosen, the method must be followed.

Method A: the 15-day method. Send the money within 15 days after receiving it. The producer may first subtract their applicable commission from premiums. A commission is the producer's pay for selling insurance. A return premium is premium money owed back, for example a refund due to a policyholder. Return premiums must also go out within 15 days. The rule allows a commission deduction from premiums only. It describes no commission deduction from return premiums.

Method B: the separate-account method. Open one or more accounts at a commercial bank, credit union or other established financial institution in Nevada. These accounts must be kept separate from the producer's personal, firm or corporate money. Deposit the premiums (net of applicable commission) and return premiums into them promptly. Keep the money there until it is sent to the person entitled to it.

Worked example: Method A

Assumptions: Jordan Price has chosen the 15-day method for Insurer Q. The agreed commission for this policy is 15%. In this lesson we count calendar days, starting with the day after receipt.

Jordan receives a $2,400 premium on June 3.

1. Commission: 0.15 × $2,400 = $360. Jordan may keep this amount.
2. Amount to remit: $2,400 − $360 = $2,040.
3. Deadline: June 3 + 15 days = June 18.

Check: $2,040 + $360 = $2,400, so every dollar is accounted for. Only the $360 commission was Jordan's to keep.

Now change one fact. On the same day, Jordan also receives a $180 return premium owed to a policyholder. The full $180 goes to the policyholder by June 18. Nothing is subtracted, because the rule provides a commission deduction from premiums, not from return premiums.

Check your understanding. Jordan has chosen the 15-day method. Jordan receives a $1,800 premium on May 4, and the assumed commission is 10%. How much must Jordan remit, and by what date?

Commingling (Mixing Money): What Is Allowed

To commingle is to mix money from different owners in one place. Nevada permits some mixing, but only within clear limits.

• Several principals in one separate account. Money for more than one principal may sit in the same separate account, provided your records make it easy to tell how much belongs to each one.
• Some of your own money in the separate account. You may add your own money that you judge prudent for three purposes: to advance premiums (pay a premium before the customer's money arrives), to build a reserve for return commissions (commission you may have to give back), or to cover other contingencies in the business of receiving and sending premiums.
• Unlimited mixing with your own money, for one principal. This is allowed only if that principal has specifically waived the separation requirement in writing, in advance.

The last rule is the most important one: permitted mixing never ends the fiduciary duty. The other people's money is still theirs, even when it sits next to yours.

Check your understanding. Morgan deposited Insurer R's premiums into Morgan's personal account last month. This month, Insurer R signs a written waiver of the separation requirement. Was last month's mixing permitted under the waiver rule? And does the waiver let Morgan spend Insurer R's money?

The Trust Account Itself

Nevada's regulations use licensee to mean any person licensed by the Commissioner. That includes producers, surplus lines brokers, motor club agents, bail bondsmen and administrators. A trust account is an account holding money for others. For these rules, it means a separate account kept under the fiduciary-money statute.

• Allowed account types: checking accounts (with or without interest), time deposits and savings accounts.
• Named trustee: the licensee must be named as trustee, the person holding the account for others.
• Signature card: the card must say, in substance, two things. First, the account is kept under the fiduciary-money statute. Second, if the licensee dies, the executor or administrator of their estate becomes the successor trustee.

Checking a Trust Account for a Deficit (Shortfall)

A deficit is a shortfall: the account does not hold enough to cover what it should. The Commissioner uses a fixed formula with two totals.

Total 1 (resources): Gross accounts receivable from insureds − uncollected commissions still inside those receivables, figured with the average commission rate + all deposits in accounts identified as trust accounts

Total 2 (obligations): Net accounts payable to producers of insurance + all accounts receivable more than 90 days old

Rule: if Total 2 is greater than Total 1, the account has a deficit. The size of the deficit is how far Total 2 exceeds Total 1.

Accounts receivable means money insureds still owe. The 90-day amount is part of what insureds owe, so it is already inside gross receivables in Total 1. The formula also adds it to Total 2. Older unpaid balances therefore push toward a deficit.

Worked example

Assumptions for Harbor Agency:

• Gross receivables from insureds: $16,000
• Average commission rate: 12.5%
• Trust account deposits: $4,000
• Net payable to producers: $15,500
• Receivables over 90 days old: $3,200

Steps:

1. Uncollected commissions: 0.125 × $16,000 = $2,000.
2. Total 1: $16,000 − $2,000 + $4,000 = $18,000.
3. Total 2: $15,500 + $3,200 = $18,700.
4. Compare: $18,700 is greater than $18,000, so there is a $700 deficit.

Change one fact. Suppose trust deposits were $5,000 instead of $4,000. Total 1 becomes $19,000. Total 2 ($18,700) is no longer greater, so there is no deficit. If the two totals were exactly equal, there would still be no deficit, because the rule requires Total 2 to be greater.

Tempting mistake: skipping the commission deduction. That gives $16,000 + $4,000 = $20,000 for Total 1, which is larger than $18,700 and hides the deficit. The commission still inside receivables is not money held for others, so the formula removes it first.

Fixing a Deficit After Notice

Once a licensee receives notice of a deficit from the Commissioner, they have 5 days to cure it. Curing requires both of these steps:

1. Deposit an amount equal to the deficiency into the trust account.
2. Send the Commissioner a written explanation of the deficiency.

A licensee who fails to cure is treated as financially irresponsible, which is a ground for license discipline under Nevada's licensing statute.

Harbor Agency, from the worked example, receives notice on November 3. Assuming calendar days, it must deposit $700 and send a written explanation by November 8. Depositing the money without the explanation would not complete the cure.

Four Deadlines That Are Easy to Confuse

These deadlines answer different questions. They also start counting from different events.

Two points prevent the most common mistakes.

The 30-day return-premium rule does not extend the 15-day method. A producer who chose the 15-day method must still remit return premiums within 15 days. The 30-day rule marks when the Commissioner treats the failure as a violation. It does not give the producer extra time. And a return premium is never a new commission the producer can keep.

The 30-day reporting rule is not a grace period. It tells the insurer or agency when it must report. It does not excuse the producer from the 15-day or separate-account duties. After a report, the Commissioner may suspend the producer's license until either the money is paid or the insurer or agency files a release of the debt that satisfies the Commissioner. If the producer admits the failure, or an examination of the producer's records shows it is true, the Commissioner may suspend without a hearing.

Check your understanding. Riley has chosen the 15-day method. Riley receives a return premium for a policyholder on September 2. By what date must Riley send it? What would September 2 + 30 days represent?

Who May Be Paid a Commission

Payment for sales work can take several forms:

• commission: pay tied to a sale
• brokerage: pay to a broker
• fee for service: a set charge for work done
• other valuable consideration: anything of value, such as a gift card

Selling, soliciting and negotiating insurance are, in plain terms, the sales activities: offering coverage, urging someone to buy it, and working out its terms. Nevada defines these terms precisely in provisions outside this lesson. Each scenario below therefore states whether an activity counts.

Work through four questions in order.

1. Is the payment for selling, soliciting or negotiating insurance in Nevada, and do those activities require a license? If yes, an unlicensed person may not be paid, and may not accept, any form of value for it. Both sides of the deal break the rule. Calling the payment a "referral thank-you" or a "service fee" does not change this. The label does not decide the question. What the person actually did decides it.

2. Is it an insurer paying a producer for sales activity? The insurer may pay the commission only if the producer has been appointed as the insurer's agent. To be appointed means the insurer has formally authorized the producer to act for it. The producer, likewise, may not accept the commission without that appointment. The statute lists exceptions, such as a reinsurance broker, renewal or deferred commissions (question 3), and certain other statutory arrangements.

3. Is it a renewal or other deferred commission? A renewal commission is paid when a policy renews. A deferred commission is one paid later for an earlier sale. Either may be paid to a person who was properly licensed at the time of the original sale, even if they are not licensed now. This allows payment for that earlier sale. It does not allow any new unlicensed sales.

4. Is an appointed producer sharing commission with another person for sales activity? The appointed producer may pay only two kinds of people: a licensed producer who is appointed by the insurer that wrote the policy, or a licensed producer acting as a broker. The statute names two specialized exceptions, and this lesson does not cover them. Separately, no licensee may accept compensation they are not entitled to under Nevada's insurance law.

Payments that are not for sales work. An insurer or producer may pay or assign compensation to a person who does not sell, solicit or negotiate insurance. This is allowed unless the payment would violate either of two other Nevada provisions, NRS 686A.110 or NRS 686A.120. Their content is outside this lesson.

Worked decisions

• Shared with an appointed producer: allowed. Producer Sam Ortiz is appointed by Insurer K. Sam shares part of a commission with Taylor, who is licensed and also appointed by Insurer K and who helped sell the policy.
• Shared with an unappointed producer: not allowed. Change one fact: Taylor is licensed but not appointed by Insurer K and was not acting as a broker. Sam may not pay Taylor for the sale.
• Gift card to an unlicensed person: not allowed. Change another fact: Taylor is unlicensed. Assume Taylor's activity counts as soliciting insurance that requires a license. Sam may not give Taylor even a $50 gift card, and Taylor may not accept it.
• Renewal after license lapse: allowed. Casey was licensed when Casey sold a policy in 2024. Casey's license lapsed in 2026. The insurer may pay Casey's renewal commission on that 2024 sale. Casey still may not make new sales without a license.

Employees who don't need a license

Some employees of insurers or producers are exempt from licensing, but only under specific conditions. Two examples:

• Administrative employees. An officer, director or employee whose work is executive, administrative, managerial or clerical, and only indirectly related to sales, is exempt. The exemption applies only if the person receives no commission on policies covering Nevada risks.
• Customer-service employees. An employee who answers requests from existing policyholders is exempt if three conditions hold: the employee is not paid directly based on the premium volume those services might bring in, does not solicit insurance, and does not give advice about policy terms or conditions.

Check your understanding. Quinn works for an agency, answering existing customers' questions about their policies. Quinn is paid hourly, does not solicit, and gives no advice on policy terms. Then the agency adds a bonus based on the premium that results from Quinn's calls. Does the customer-service exemption still apply?

Transaction Records and How Long to Keep Them

Every producer must keep complete records of transactions under their license. For each policy placed or countersigned by or through the producer, the records must show at least:

• the names of the insurer and the insured
• the policy or contract number and its expiration date
• the premium payable
• the names of everyone the producer accepted business from, or promised or paid commissions to
• all premiums collected
• any additional information the Commissioner reasonably requires

The records must be open to the Commissioner's examination at all times. The Commissioner may require the producer to provide any of this information in whatever form the Commissioner specifies. Records may be kept electronically, as long as they are still retained as the rule requires.

Retention. Records of a particular policy may be destroyed 3 years after that policy expires. The clock starts at expiration, not at the sale date. The rule permits destruction at that point. It does not require it.

Example. A policy is sold April 1, 2025, and expires April 1, 2026. The earliest destruction date is April 1, 2026 + 3 years = April 1, 2029. Counting from the sale date would give April 1, 2028, which is a year too early.

Check your understanding. A producer's electronic file for a policy lists the insurer, insured, policy number, premium payable and premiums collected. The policy expired on October 15, 2026. What required items are missing, and when may the file be destroyed at the earliest?

Practice on Your Own

Work each problem before opening its answer. The same assumptions apply: count calendar days, and treat commission rates as given in the problem.

1. Eden has chosen the 15-day method. Eden receives a $3,000 premium on April 20, and the assumed commission is 12%. How much does Eden remit, and by when?

2. Test this trust account for a deficit:

• Gross receivables from insureds: $30,000
• Average commission rate: 15%
• Trust deposits: $6,500
• Net payable to producers: $29,000
• Receivables over 90 days old: $3,750

If there is a deficit, and notice arrives February 10, what must happen, and by when?

3. A licensed, appointed producer offers a $100 gift card to an unlicensed friend. Assume the friend's activity counts as soliciting insurance that requires a license. The producer calls it a "referral bonus." Is this permitted?

4. Parker deposits customers' premiums into a properly titled Nevada trust account. Parker also adds $2,000 of personal money as a reserve in case return commissions come due. Parker then uses $500 of customers' premiums from that account to pay a personal credit card bill, intending to repay it Friday. Which actions are permitted?

5. A producer's record for a policy is complete. The policy expired June 30, 2027. The producer wants to destroy the record on June 30, 2029. Allowed?

What to Remember

• Premiums you receive belong to others. You hold them as a fiduciary. Using them for yourself is embezzlement, even if you plan to repay.
• If you don't remit immediately, choose and follow one method for each principal. Either remit within 15 days (premiums less commission, plus return premiums), or deposit promptly into a separate Nevada trust account.
• Permitted mixing doesn't end the fiduciary duty. Unlimited mixing with your own money requires that principal's specific written waiver, given in advance.
• Trust account test: Total 1 = receivables − commissions at the average rate + trust deposits. Total 2 = net payables to producers + receivables over 90 days. A deficit exists only if Total 2 is greater. It must be cured within 5 days after notice by deposit and written explanation.
• Keep the deadlines separate: 15 days after receipt (method A), 30 days after receiving a return premium, 30 days after a premium's contractual due date (insurer's report), and 5 days after deficit notice.
• Commissions for sales work: only licensed people may be paid or accept them. Insurers pay only appointed producers, apart from listed exceptions. Appointed producers share only with licensed producers appointed by that insurer, or with licensed brokers. Renewals may go to someone who was licensed at the time of sale. Labels don't decide; activities do.
• Records: keep the listed items for each policy, available to the Commissioner at all times (electronic is fine). They may be destroyed 3 years after expiration.

Next, apply these rules alongside earlier topics in Solve mixed cases and repair your weak spots.