What is a premium trust account?

A premium trust account is a separate bank account where an insurance brokerage holds money it collects on behalf of clients and insurers — kept apart from the operating account that runs the business.

When a client pays a premium, that money is not the brokerage’s to spend:

• Most of it belongs to the insurer until it is remitted.
• Part of it is the brokerage’s commission.
• Some may be client funds, such as return premiums or unearned amounts.

Until those amounts are paid out, the brokerage is holding the money in trust on behalf of others. The trust account exists so that money is structurally protected from the day-to-day pressures of payroll, rent, and overhead — it never gets quietly spent on operating costs.

Segregation also makes the trust position knowable. Because the account holds only trust money, its bank balance can be compared directly to what the brokerage owes out of trust. A healthy position means the cash in trust (the trust assets) is at least equal to what’s owed out (the trust liabilities), with no shortfall.

Canadian brokers are generally expected to maintain a segregated premium trust account, keep proper records, and reconcile it. The specific thresholds, deadlines, and reporting differ by province, so confirm the precise rules with your provincial broker regulator.

For the full picture — trust assets vs liabilities, surplus vs shortfall, and monthly reconciliation — see our guide to insurance premium trust accounting in Canada.