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What are bonds and how do they work?
A freight broker bond is a type of specialty insurance that guarantees protection to shippers and carriers in the event the freight broker fails to make payment or commits fraudulent business practices. The bond also guarantees to the Federal Motor Carrier Safety Administration (FMCSA) that your firm will adhere to state and federal laws governing the trucking industry.
To obtain surety bond insurance, the freight company must pay a premium against the $75,000 bond amount. The premium amounts differ based on the type of bond and the creditworthiness of the applicant. Premiums usually range from 2-4 percent of the $75,000 minimum bond required by FMCSA to be a licensed freight broker.
The surety bond insurance experts at Assurance Total Protection have mastered the bond environment and can guide your trucking firm through the process.
What are trusts and how do they work?
A freight brokerage trust fund is like a bank account to which FMCSA has access. A minimum $75,000 in funds are placed in trust and must remain deposited if you maintain a valid broker’s license.
FMCSA can access those funds in the case of a claim against you or your company. The downside of the trust approach is that your company has $75,000 of working capital that is not available.
Smaller companies without those resources must borrow the amount and pay interest.
What are the benefits of being bonded?
Being bonded provides a commercial trucking business with an added layer of security. With a bond guaranteeing performance, a company can feel more secure in taking calculated risks to grow the business.
A bonded business is better suited to work with financial institutions and collaborate on underwriting projects.
At Assurance Total Protection we handle a variety of surety bond products that include, but are not limited to the following:
- Freight Broker Bond
Contact the surety bond insurance experts at Assurance Total Protection and start the journey to sound financial footing.
What Does the Freight Broker Bond Cover?
The freight broker’s surety bond or trust fund exists to cover past due freight invoice balances that the broker contractually owes to the carrier. Most of the loads moved within the U.S. are done so without the carrier or the broker being paid in advance of pickup or delivery.
Most brokers and carriers perform services and then invoice and collect payment after the fact. The purpose of this specialty insurance is to guarantee that carriers are paid for the loads they delivered, invoiced the broker for, and attempted to collect. It is important to note that the broker’s bond does not cover cargo damage/loss or property damage/loss claims Those claims are covered under the carrier’s Bodily, Injury, and Property Damage insurance and/or cargo insurance policies.
The choice of a surety bond or trust fund provider can be a major decision for a trucking company. Companies should consider the viability of the bonding company or financial institutions. In a volatile market, bonding companies and financial institutions can fail if there are more claims paid out than funds available.
In choosing a provider, trucking firms should confirm that bonding companies and financial institutions have the resources to investigate and fight false claims made against your bond or trust.
In 2020, America’s truckers moved more than $723 billion in freight, a foundational part of the American economy. With that much at stake, protecting those shipments is paramount.
Let the surety bond insurance experts at Assurance Total Protection guide your trucking company through the bond and trust process. The protection of your moving assets is critical to your company’s long-term success.