Wednesday, August 17, 2016

The Ins and Outs of Freight Broker Surety Bonds


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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