If you’re looking to get into business as a freight broker, you’ll need to make sure you have a freight broker surety bond behind you.
While the legal requirement for a freight broker surety bond is $75,000, the good news is you don’t have to come up with all that cash yourself - there are freight broker bond companies who can help.
Here’s everything you need to know about freight broker surety bonds, including how much they cost and how to find a bond company that’s right for you.
For those just looking for a quick answer, here are our top choices.
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A freight broker surety bond is a type of guarantee that acts as insurance for a broker’s customers and vendors.
If a broker doesn’t fulfill their contractual obligations, such as failing to pay a trucking company or committing fraud, carriers and shippers can be compensated using funds from the bond.
In short, if for whatever reason you don’t fulfill your end of the agreement, the bond makes sure that your partners get paid.
Freight brokers need surety bonds as a licensing requirement to operate in the US.
Every freight broker must obtain a bond before beginning business operations and undertaking the transportation of goods in the US. If you don’t secure a BMC-84 or BMC-85, you won’t be able to operate your freight brokerage.
The surety bond company must be authorized by the Secretary of the Treasury - find the full list here.
Across every industry, surety bonds act as a financial guarantee that specific tasks will be fulfilled.
In the trucking industry, surety bonds protect shippers and motor carriers. If you break your agreement - like you don’t pay your truckers' invoice on time or you don’t deliver a shipper’s goods - the other parties can file a claim against your bond.
A surety bond is a legally binding contract between 3 separate parties:
To get a surety bond, the principal - the freight broker - pays a premium to the surety - a surety bond or insurance company - and signs an indemnity agreement that guarantees that they will use business and personal assets to reimburse the surety if a claim is made against the bond.
If these assets are not collectable - like the principal refuses to pay or doesn’t have the money to pay - the surety will make the payment needed to satisfy the claim. They will then seek to get repayment from the principal for the full value of the claim.
Unlike an insurance policy, surety bonds protect the principal’s clients and the obligee, not the principal. The principal is responsible for paying out any valid claims against the bond.
A surety bond is a guarantee of payment for the different parties involved, so your partners can be confident using your services and you meet the licensing requirements mandated by the government.
Freight brokers are required by the Federal Motor Carrier Safety Administration (FMCSA) to have a $75,000 BMC-84 surety bond or $75,000 BMC-85 agreement as of October 1st, 2013.
Highly-qualified brokers might choose to obtain an additional $25,000 surety bond coverage on top of the required $75,000 amount - this can help you to compete with other brokers and appeal to customers, but it’s completely optional.
When it comes to meeting the $75,000 FMCSA requirement, freight brokers have two choices: BMC-84 and BMC-85.
The option to go for a BMC-84 or BMC-85 depends mostly on your financial situation and the size of your business.
For the majority of freight brokers, a BMC-84 surety bond is the best option as it offers more flexibility, security, and lower upfront costs than a BMC-85.
However, freight brokers with sufficient funds might choose to opt for a BMC-85 trust fund instead - especially if they have not been approved for a BMC-84 surety bond.
A freight broker bond covers situations where freight brokers fail to pay freight charges as agreed to under contract.
If a carrier (or sometimes shipper depending on the contract) has a claim against you, they will file it with your surety bond company – who will then evaluate the claim based on the evidence provided by the claimant.
Your bond company has the responsibility for deciding whether or not the claim is valid - and whether the claimant should receive money from the surety bond.
A freight broker bond can cost anywhere from $750 to $9,000 per year.
The cost is determined by the surety bond company and is a percentage of the full $75,000 bond amount. Costs typically range from 1-12% of the total amount.
Costs are calculated using a range of different factors, including:
Payments can be made annually or monthly, depending on the freight broker surety bond company you choose to work with.
It is possible to get a freight broker bond even if you have bad credit - but you will usually have to pay a higher bond premium.
Freight brokers with a credit score of 650 or lower or with no credit history will likely be required to pay rates starting from 5% up to 15%.
Look out for bond companies that offer special low credit programs on surety bonds to find the best rates.
If you’re an experienced broker with an excellent credit score, good financial records, and no current or previous bond claims then you’re more likely to be eligible for cheap bonds.
In these cases, bond rates can be as low as 1-2% or $750-$1,500 per year.
Here are a few things you can do to get a cheaper bond:
To get a BMC-84 freight broker surety bond, you will need to apply with a registered freight broker surety bond company.
Most bond companies will require some or all of the following information to process your application:
Check with your bond company to see what information they need to provide a quote and approve the bond.
When you’ve applied for your surety bond, you will then need to fill out a BMC-84 form to register with the FMCSA. Some surety bond companies will do this step for you.
You can find the official FMCSA BMC-84 form here.
You need to include your name, company name and address, as well as information about the ‘Surety’ - aka your chosen bond company.
When you’re applying for a freight broker surety bond, it’s important to find a reputable company that will be able to provide you with competitive rates and good service.
Freight broker surety bonds must be issued by a surety company that has been authorized by the Secretary of the Treasury - but the general public doesn’t have access to these companies. This is where freight broker surety bond companies come in.
To help you find the best freight broker bond companies for your broker business, we’ve put together our list of the top agencies currently providing freight broker surety bonds.
To choose who made the cut, we evaluated different surety bond companies using the following criteria:
While most bond companies are brokers that sell bonds from third-party insurance companies, Jet Surety is an insurance company that sells their bonds directly – which often leads to lower premiums. It also means that Jet Surety can quote and issue bonds more quickly than competitors.
The company also sets themselves apart from the competition by allowing freight brokers to pay premiums on a monthly basis (vs upfront at the beginning of the bond term).
Freight brokers can receive quotes and purchase bonds directly on their website but Jet Surety also has staff available for freight brokers that prefer to purchase over the phone.
One of the largest bond providers in the US, JW Surety bonds offer freight brokers an easy route to obtaining a BMC-84 surety bond. Apply online via their website and get a free quote in minutes to find out what rates you can expect from your current credit score. JW Surety Bonds also offer a 100% money-back guarantee in case your bond is not accepted and a team of specialists to help combat false claims.
An award-winning bond company, Surety Bonds Direct aims to make the process of applying for your freight broker bond simple, fast and hassle-free. They offer a same or next-day service for bonds and a 100% money-back guarantee. They also have bank-level encryption to keep your data secure. Surety Bonds Direct completes the bond forms for you to make the process extra easy.
Bryant Surety Bonds offers freight brokers reliable, friendly service to help you get bonded and licensed. They offer no obligation quotes on their surety bonds and they have a helpful online cost calculator to give you a rough quote instantly. Bryant Surety Bonds works with some of the top bonding companies including Liberty Mutual, ASI, and more.
Boasting some of the lowest rates in the industry, Lance Surety gives you the chance to secure a freight broker surety bond online in minutes. Their secure online application is efficient and easy to use and you can lock your initial bond rate for up to 90 days. Lance Surety also offers exclusive bad credit programs to help you get bonded even if your credit score is poor.
With 50 years of experience in the insurance industry, Brunswick Companies offer surety bonds in all 50 states. Their hands-on, personal style helps freight brokers get the surety bonds they need - simply fill in their online form to request a quote and get connected with a friendly and professional customer service representative.
See the answers to the most commonly asked questions about surety bonds, broker insurance, and more.
Freight brokers are required to have a $75,000 BMC-84 surety bond before they begin operations.
A BMC-84 bond is a type of freight broker bond - it is a license surety bond required by the Federal Motor Carrier Safety Administration (FMCSA) for any businesses looking to secure a freight broker license.
The BMC-84 bond is also required for freight forwarders.
A bonded freight broker is a broker who has obtained a surety bond in order to obtain or renew their license.
A surety bond is not insurance, it is a type of credit.
With broker surety bonds, the risk lies with the freight broker - known as the principal - and not with an insurance company. The principal is responsible for paying any valid claims against the bond. If they are unable to pay or refuse, the bond company will pay the claim instead - the bond company will then seek to collect the money from the principal.
Whereas insurance protects your business, a surety bond protects your client’s business in case you do something wrong or something fraudulent.
All freight brokers need a bond worth $75,000 in order to obtain a license - but there are no legal requirements insurance.
The following insurance policies are recommended but optional:
Freight brokers are generally not responsible for the transportation of goods and that means they have limited liability for cargo claims, such as damage to cargo.
But freight brokers can be found liable for negligent acts and/or omissions of a motor carrier depending on the level of control they have over delivery or whether or not they provide the motor carrier with equipment.
A freight broker can also be liable for negligent selection and/or retention of a motor carrier if they have failed to perform an investigation of the motor carrier and if they have reason to know that the motor carrier was engaged in unsafe practices.
It is important to pay careful attention to any contracts to make sure you know what you’re liable for - and to avoid any nasty surprises.
Successful freight brokers typical have margins of 12-18% on their loads.
To get an interstate Operating Authority - or an MC number - you need to apply using the FMCSA’s registration system.
If you have never registered with the FMCSA before, you’ll need to get a US DOT number before you can apply for an MC number. You can register here.