California Life and Health Insurance Practice Exam

If a life agent misappropriates fiduciary funds, what crime is he guilty of?

1. Fraud

2. Theft

3. Embezzlement

4. Assault

The correct answer is: Theft

In the context of life insurance, a life agent has a fiduciary duty to handle clients' funds responsibly and ethically. When an agent misappropriates these funds, they are essentially taking money that they are obligated to protect and use it for personal gain. This act of taking someone else's money with the intent to permanently deprive them of it falls under the definition of theft. The term "theft" encompasses various illegal acts of taking or using someone else's property without permission. In this scenario, the life agent's actions of misappropriation signal an intent to steal fiduciary funds that were meant to be safeguarded. While embezzlement is also a serious crime that involves the wrongful appropriation of funds, it usually implies a violation of trust in a more formal employment context and typically requires a more complex situation than outright theft. Therefore, focusing specifically on the act of misappropriation in this case aligns more closely with the definition of theft.