As a freight broker, you have enough on your mind without worrying about the particulars of your licensing requirements. The $75,000 surety bond required by the Federal Motor Carrier Safety Administration (FMCSA) is just one aspect of the licensing process, but can raise many questions. This quick guide to freight broker bonds will help you navigate the bonding process and answer those questions.
The Freight Broker
Surety Bond
First, you should know the purpose of the surety bond.
Bonds are a form of financial security that guarantee performance and
compliance. If a broker violates the terms of their surety bond and a claim is
filed and proven, the surety company pays the claim up to the bond’s full
amount. The bondholder must reimburse the surety company for any claims paid.
You should be familiar with the terms of the bond you’re
purchasing to ensure you are in compliance with it at all times. It’s easy to
avoid claims if you know exactly what laws you need to follow as a freight
broker.
Know Your Financial
History
Brokers don’t pay the full $75,000 bond amount—bond premiums
are determined via underwriting, which is a thorough examination of the
applicant’s financial history. Applicants typically pay anywhere from 1-10% of
the bond amount.
You should be aware of your financial history and your
credit score—stronger financial credentials means a lower bond premium. However,
many surety companies offer financing options for applicants with imperfect
credit. Regardless of your credit, you should be ready to provide financial
information to the surety company you contact.
Find a Surety Company
Your next step is to find a surety company to work with.
Your best bet is to go through a national agency that works with several
insurance companies—they can compare rates and make sure you get the lowest
bond premium possible.
Purchase Your Bond
You’ve found a surety company that you trust and got a
competitive premium quote—the only thing left to do is make a purchase! After
purchasing the bond, you’ll continue with the broker registration process. Once
you’ve registered, you’re in business!
Contact the FMCSA if you have questions about the
registration process and to make sure your freight brokerage is in compliance
with federal law. Contact a reputable surety bond agency to purchase your bond.
(this is a guest post, thank you Melanie)
Melanie Baravik is
part of the educational outreach team at SuretyBonds.com, helping educate consumers about the
particulars of surety bonds.
Any questions on bonds or on becoming the best freight broker ever, give me a call: 214-206-1169
Moving forward,
Jeff Roach
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