Freight Broker Bond
What is a Freight Broker Bond?
A freight broker is a person or entity responsible for arranging the transportation of property by a motor carrier. All freight brokers must register with the Federal Motor Carrier Safety Administration (FMCSA).
A freight broker surety bond, also known as BMC-84, is a mechanism for protecting shippers/motor carriers. Having a BMC-84 bond helps ensure that you as the broker abide by the Federal Motor Carrier Safety Administration (FMCSA) rules and regulations. The cost of a freight broker bond ranges from $938 to $9,000. The pricing is calculated as a small percentage of the full $75,000 bond amount, typically between 2-12 percent.
Understanding the Freight Broker Bond Process
Effective October 1, 2013, the FMCSA requires freight brokers to post a $75,000 bond during the registration process. Freight brokers must complete a freight broker bond application with a surety bond company during the registration process. The freight broker bond premium is paid on an annual basis. The premium amount is determined during the underwriting process and is a percentage of the bond amount. No collateral is required.
Like most industries, not all surety bond companies are created equally. The best ones provide a fast turnaround, sell to industry-leading companies, and offer more competitive premium rates.
While you are required to obtain a freight broker bond to function as a freight broker, you have the freedom to choose the surety bond company that best suits your circumstances, so choose wisely.
Pricing & Terms
Surety bond costs are a percentage of the full bond amount, which is usually determined by your personal credit. Providing industry experience, strong personal credit, and business/personal financials will help lower your bond rate. Reach out for a quote today.
Freight Broker Bond Price Calculation
Underwriters consider several factors in determining the price calculation of the premium that must be paid. The most important factors are credit history/score of the freight broker, length of business experience, and financial strength of the freight broker.
The credit history/score of the freight broker is the most heavily weighted factor in the price calculation, but the ability of the underwriter to review financial statements and business experience allows for a more comprehensive analysis of the freight broker’s application. The more detail the underwriter can review, the more likely a freight broker may overcome negative credit history.
Those freight brokers with solid credit histories, experience, and financial strength pay a lower bond percentage than those with poor credit histories, lack of experience, and financial weakness. Bond percentages typically range between 2 percent to 3 percent. That amounts to about $1,500 to $2,250 annually for those with solid credit histories. Those with poor credit histories will pay between 4 and 15 percent of the $75,000 bond, amounting to about $3,000 to $11,250 on an annual basis.
Bond Purchase Process
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Frequently Asked Questions
There are hundreds of different bonds for all kinds of purposes—but regardless the industry or project—they all operate essentially the same way. A surety bond guarantees that you will operate professionally and if you break the rules, a claim can be made on your bond which you’re responsible to pay.
It’s a guarantee that you will complete the work and fulfill your contractual obligations. Think of it as insurance for the public, not your business.
For most bonds, you can get instantly approved and print bonds at your home or office. However, we do not offer instant approvals for a select number of bonds, as the underwriting process generally involves a more extensive review of the applicant.
License and permit bonds are a specific class of surety bond. License and permit bonds are required by government agencies as a pre-licensing requirement before allowing a business to operate legally. A license and permit bond compels a business to operate in accordance with federal, state, and local laws/regulations.
Looking to Get Started or Have Questions?
The bonding process can be confusing and cumbersome. Our surety bond experts are standing by and ready to answer any questions. Let’s get you bonded today!