Freight Broker Bond
A freight broker bond is a type of surety bond that freight brokers must obtain to get or renew a license. The freight broker surety bond requirement exists to help establish credibility and prevent fraud or failure to pay motor carriers or shippers in a timely manner. While freight brokers have the option to put $75,000 into a trust, that requires full payment upfront. It also requires you to maintain that amount even when paying out claims.
Brunswick Companies recommends getting a broker bond — also called a trucking bond, BMC-84 bond, or property broker bond — because it is the more secure, cost-effective, and well-regulated option for all freight brokers, regardless of company size or length of experience.
Benefits of a Freight Broker Bond
There are two main benefits to securing a freight broker bond (BMC-84) instead of setting up a trust (BMC-85).
- All assets remain available to your business instead of being tied up in the trust. This especially benefits smaller or less experienced carriers with already limited assets.
- The surety company thoroughly investigates claims made against the bond prior to making a claim payment. The surety company shares the liability and will do their best to mitigate claims made against the bond; trust companies will often pay claims after little or no investigation because they have no liability.
How Much Does a Freight Broker Bond Cost?
The Federal Motor Carrier Safety Administration (FMCSA) requires a surety bond in the amount of $75,000. While you aren’t required to pay the full amount upfront, a percentage of it is required yearly as the bond premium. The percentage is determined by your financial history, but the premium is often between 1.25% and 10%, making the yearly payment somewhere between $938 and $7,500.
Those with low credit scores or new broker businesses will pay a higher premium. However, the percentage is assessed and paid annually, so the percentage can decrease as you improve your credit and/or gain experience.
Freight Broker Bond Requirements
It’s important to understand how freight broker requirements are designed and how you can proceed. To obtain a freight broker bond, business owners need to provide a freight broker surety bond application and a credit check or a financial review. Documentation demonstrating business experience and the company’s financial strength also helps in obtaining a freight broker bond. Since financial standing is used to determine the freight broker bond premium cost, documentation showing good financial standing helps to secure a competitive rate.
What Makes a Superior Freight Broker Bond Company?
Working with an experienced surety broker can provide an edge in obtaining the best pricing. Mark Levinson, Senior Vice President of Surety, has extensive experience in providing fidelity bonds. With decades of experience, Mark has developed strong relationships with the leading surety underwriters in the business so that we may provide our clients with access to more favorable terms and conditions.