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Insurance companies use "float" money taken in from premiums. Even though it is not their cash they invest it as long as when needed they can pay a customer claim. Could a non-insurance company that gets funds from customers for holding then create a similar scheme to use these funds for investment as long as they have the funds available when the customer needs them. I would believe the company would have to have full disclosure but if they do, is that possible within the scope of U.S. law?

  • This is a really great question. Any company that holds onto money for whatever reason should seek to invest it, provided liquidity isn't vital for operations. Thus this question really has the scope of any company, quite a scope indeed. – TheEnvironmentalist Apr 21 '18 at 7:03
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Any businesses that takes payment in advance can use that money as they see fit, there is nothing special about insurance companies. Airlines, travel agents and construction companies are all examples of businesses that routinely take deposits.

There are some businesses that are required by law to hold funds in trust but these are the exceptions rather than the rule.

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    What if the funds are NOT payments but money that will eventually have to be paid back to the customer. These funds would be separate from revenue. – SupremeA Apr 21 '18 at 12:51
  • @SupremeA the question has been answered - if you want to ask a different question please do so – Dale M Apr 21 '18 at 23:40
  • I kind of figured that but was curious if the funds were not revenue but funds simply held for the customer would make a difference. Almost like funds in escrow – SupremeA Apr 22 '18 at 0:19
  • @SupremeA That sounds like a Ponzi scheme... I can't see any legitimate business wanting to associate with such a model, as we call it, "robbing Peter to pay Paul". – Ron Beyer Apr 22 '18 at 4:25
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    @RonBeyer actually- that’s how banks work – Dale M Apr 22 '18 at 8:23

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