State RegulationsCA specific✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
Under California Insurance Code Section 1733, funds a licensee receives as premium or return premium are held:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Section 1733 provides that all funds received by a licensee as premium or return premium are received and held in a fiduciary capacity; a licensee who diverts or appropriates those funds to personal use is guilty of theft, punishable as provided by law. This includes return premiums owed to policyholders. The fiduciary duty means funds must be kept separate and transmitted promptly — commingling and misuse expose the licensee to criminal and license-discipline consequences.
Why the other options are wrong
- B) The funds never become the licensee's personal property; commission is earned separately under the agency contract.
- C) Premiums belong to the insured-insurer relationship and are held in trust, not invested by the agent.
- D) The funds have a clear legal classification — fiduciary funds — from receipt until proper disposition.
Memory hook
Premium and return premiums are client money in your hands. Spend it yourself = theft.