When you operate a freight business, you will need a freight broker bond. There are different things you should know about these types of bonds which are mandatory in the freight industry. This bond is specifically meant to protect the shippers and carriers. Here are 4 things you should know about freight broker bonds.

1. Who is Protected by this Kind of Bond?

A freight broker bond or surety bond aims to protect the motor carriers contracted by the broker to carry goods. It helps ensure the broker fulfills their contractual obligation with the cargo transporters and pays for the services rendered. If the broker fails to pay the carrier for the work done, this is when the cargo carrier files a claim to get payment from the bond. This will help the victim get the money they are owed by the broker. The surety reviews the claim’s validity and will settle the payment owed. 

The freight broker also benefits from being part of the bond agreement even when the cargo carrier is supposed to be the beneficiary. The brokers’ success or failure depends on their capability to link the shippers to motor carriers. The cargo carriers are often willing to deal with brokers with freight broker bonds because they know payment will be guaranteed. 

2. How Much Does it Cost

A freight broker bond is also called freight broker surety, and each freight forwarder should have it. The current price of a surety bond is $75,000. Experienced brokers at https://swiftbonds.com/license-permit-bonds/freight-broker-bond/ explain that different factors are considered when calculating the freight broker bond premiums. For instance, your credit score is taken into account when the cost is calculated. With a good credit score, it means that your premium can range from 2-5%. However, those with bad credit can get premiums as high as 15% of the bond amount. 

The surety also needs to understand the nature of your business. It is generally believed that an organization that has been in business for a sufficient amount of time has better processes that help reduce risk, and this significantly lowers the cost of the bond. The surety also needs to understand the status of your company’s  financial health. Make sure you provide accurate information to get the best deal.    

3. When and why Do You Need It?

All freight brokers are required by the law to get a license. If you are a freight broker, you should obtain a freight broker surety bond first before the license is granted. When you get the bond, you need to provide proof to the authorities in your state and meet other licensing requirements. After obtaining all these requirements, you can legally work as a freight broker. You must maintain your bond which is valid for one year. This means you should renew it annually to avoid penalties. Your bond becomes invalid if you fail to maintain it. 

The purpose of it is to ensure that freight brokers will maintain high ethical standards by paying all the carriers they hire. Missing or delayed payments can lead to consequences that can impact your freight business. For example, non-compliance will render your bond invalid. To protect your business if you are a freight broker, you must check the regulatory authority’s page to ensure you are fully compliant. 

4. How do you get One?

To be able to get this kind of bond, it is a good idea to understand how to find the best surety agency from the beginning. When you deal with the appropriate surety company, you can reduce the costs of the bond, especially if you know what you want. The best surety agencies will typically work with reputable bonding companies. You should know that each bonding company offers different underwriting requirements. Therefore, each application is treated differently. 

A good agent can link you with the most suitable surety company with extensive knowledge of the market for that particular bond. Experienced agents also understand the operations of different surety companies, and they can help you get the lowest possible rates. When you are able to find the right agent, they can process your application quickly, so you don’t miss the deadline. Make sure the entire process is streamlined so that you do not miss anything.

Each freight broker must have a bond to protect the interests of the carriers. Different factors are considered to determine the cost of your bonds; the type of the business, experience, credit history, and financial health of your company. To get the best freight broker bond deal, you should work with the right agent.