Tennessee Insurance Practice Exam

What should an agent do if a collected premium check is made out to the agent rather than the insurance company?

1. Deposit the check into the agency's account

2. Return the check to the customer and collect a new one

3. Cancel the application

4. Forward the check to the insurance company

The correct answer is: Return the check to the customer and collect a new one

If a collected premium check is made out to the agent rather than the insurance company, the appropriate action is to return the check to the customer and request a new one made out to the correct entity. This is crucial because handling premium payments improperly can lead to serious legal implications, including potential issues with the state's insurance regulations. When a check is made out to the agent personally, it creates complications in terms of accountability and record-keeping. Insurance agents have a fiduciary duty to ensure that premium payments are processed correctly and transparently. Accepting a check made out to oneself could be viewed as misappropriation of funds and would create confusion regarding the payment status of the policyholder. Returning the check ensures that the transaction is clear and accurately reflects the customer’s intent to pay the insurance company for coverage, thus maintaining transparency and compliance with regulatory standards. This process safeguards both the agent and the customer, reinforcing trust and ensuring proper accounting practices are followed.