Freight brokers moving loads across state lines are required by the Federal Motor Carrier Safety Association (FMCSA) to have a $75,000 Broker’s or Freight Forwarder’s Surety Bond (FORM BMC-84). The bond is required to protect carriers from financial losses caused by negligent or fraudulent broker actions.
Jet Insurance Company alone provides this freight broker bond directly to our customers, without agents or middlemen. Ultimately this allows freight brokers, freight forwarders, and property brokers to secure lower prices and save time when purchasing the bond.
Perhaps the most important benefit to brokers partnering with the team at Jet is partnering with a company that is going to combat unwarranted claims. Not only do we address each and every complaint ourselves, but we have partnered with Lexington National Insurance Company and an experienced third-party claim administrator to ensure you have the best defense possible.
You can reach the freight team directly at 210-670-5955.
At Jet, you can purchase the freight broker surety bond for as low as $93 a month or $925 annually. Multi-year term rates are available at a discount for certain applicants. The cost of the bond is dependent on the personal credit and experience of the broker. Below are examples of pricing in some of our rate tiers, please note not all rates are shown below.
|Rate Tier||Monthly||1 Year||2 Year|
If you do not immediately get a quote, an underwriter from our team will review your submission. Once reviewed, they will reach out to you and may require additional information in order to provide a quote. Typically, new broker submissions will need to be reviewed by an underwriter, while experienced brokers will be able to purchase their FMCSA bond online in a few minutes.
The primary purpose of the Federal Motor Carrier Safety Association is to ensure safety on the roads for and from trucks and buses. In addition, they are charged with the financial security of operations dealing with cross-state commerce. Freight brokers fall under the FMCSA’s authority and due to the potential of financial damage caused to others (mainly non-payment to carriers for a delivered load) a surety bond of $75,000 must be purchased.
The surety bond is a guarantee from the surety carrier (Jet) that should the broker not uphold their end of a contract, create a financial loss and not make proper restitution, then the surety company will make payment to the damaged party.
Surety bonds are a tool used to provide coverage where other insurance companies have a gap in their coverage. You will see exclusions for fraud and unlawful behavior on typical insurance policies. So, surety bonds are required by the FMCSA to cover these losses. Bonds are never in the favor of the insured, instead protecting others from the insured. Hence why the FMCSA demands this bond be in place, as no one would typically purchase a policy that didn’t benefit them when peril arises.
The bond acts more like a letter of credit, promising payment under the pretenses mentioned above. This is one reason why credit checks are required to determine the premium rate.
There is a sizable benefit for freight brokers to purchase the BMC 84 form (surety bond) as opposed to the other financial security option available, the BMC-85 Trust Fund (cash deposit). In either case, $75,000 is the necessary penal sum required.
A BMC-85 Trust Fund Agreement provides the same financial security to carriers as the bond, but the key difference is $75,000 is provided by the broker as collateral that is deposited into a third-party trust fund. With the surety bond option, brokers need only pay the premium, which is a small percentage of the $75,000 penal sum.
The $75,000 bond limit would need to be maintained at all times. So, if a claim payment is made out, the broker must refill the trust fund to be $75,000 otherwise be out of compliance and not allowed to continue brokering. Surety carriers, like Jet, are indemnified against losses so they need to be reimbursed as well for losses paid out, however, we are much more incentivized to deny frivolous claims as you are our customer who we want to stay in business for years to come.
Once you purchase your bond, an electronic copy will be immediately available for your records. The actual filing of the bond is handled by Jet Insurance Company to the FMCSA. We file the bond immediately to the FMCSA.
Freight brokers can verify the status of their bond by looking up their business on the FMCSA License and Insurance lookup page.
To cancel the bond email us at [email protected] and request cancellation.
If you purchased the bond on an annual term, you may be entitled to a prorated refund. If you pay in monthly installments there will not be a refund.
The BMC-84 bond has a cancellation period of 30 days. Once you notify us and we cancel with the FMCSA the bond will remain active for 30 more days. You remain liable during that time period. After the 30-day grace period, you can no longer broker any business legally unless that bond is reinstated or a new bond is purchased.
If you have any questions, you can contact Jet's freight division at 855-470-3773.
The bond is continuous until canceled by the surety company. Meaning the surety company will have to actively cancel the bond if they do not receive premium prior to the bond’s expiration date. For Jet’s annual paying customers we will notify you prior to your bond’s expiration date and as long as payment the bond will remain active.
For monthly customers, the premium is set to automatically withdraw each month from the debit or credit card provided. No action is needed by the broker to keep the bond active, other than making sure the card provided is good to go. However, Jet will underwrite the bond annually which may result in a lowered or increased premium rate. In such cases, the broker will be notified and have the option to continue payments.
The simple way to look at avoiding surety bond claims is for brokers to fulfill their contractual duties. In reality it is not so simple.
VETTING SHIPPERS. A good first step is to vet the shipper's ability to pay. There are several ways to determine a shipper's ability to pay and the most popular is credit checks. Most load boards and freight factoring companies will provide those resources. Brokers should work on ways to build trusting relationships with shippers.
FACTORING COMPANY. Factoring companies are an integral way to avoid claims. Utilizing a factoring company will get truckers paid promptly and they will also handle the invoicing of the shipper. A carrier is going to demand payment once the load is delivered and the terms are typically 21-30 days. Brokers may offer the ever popular “quick-pay” option which shrinks the terms into a couple of days on average. Either way shippers operate on net-30, 60 or 90 days. So a large gap exists with the broker on the hook. A factoring company is contracted with, who purchases the invoice from the brokers and alleviates some of the risk inherent in the money transfer.
CLEAN YOUR ROOM. A well managed paper trail properly allows brokers to have a slam dunk case against a carrier's flippant claims or rate disputes, which are all too common. Only enter into well written contracts and gather and store all documentation and communications. Having a system in place to easily recall necessary paperwork or communications so brokers can avoid being duped. A broker doesn’t want to pay for a mistake they did not commit or waste time feverishly hunting down evidence to prove their innocence.
VETTING TRUCKERS. Vetting truckers is very important for a broker's credibility and liability. For surety, it is not as important, but where there is smoke there may be fire. And a trucker with a troubled past will increase the odds they fraudulently place a claim against a broker’s surety bond. Checking the FMCSA Safer System, subscribing to a freight safety report system, getting current insurance certificates, and verifying they have the experience necessary.
TRANSPORTATION MANAGEMENT SYSTEM. Having that documentation ready is very valuable. Data management systems, also known as Transportation Management Systems, are great tools to maintain documentation and communications. A surety bond claim can come straight into Jet from the damaged party. We will contact you immediately about the claim and typically request documentation concerning the load.
PARTNER WITH A SURETY COMPANY. Getting a surety bond directly from the surety carrier is integral when dealing with truckers who are all too ready to cry wolf. Surety agents and brokers are not equipped to handle your claims needs.
If a broker has a valid claim generally it is because they did not pay a carrier—the broker needs to pay the carrier for the service provided. Failure to do so will result in the end of the brokerage.
Carriers cannot file a claim against the bond until 30 days after delivery. Jet will mandate they wait for this before any claims handling process begins, but we will let the broker know immediately as it is in everyone's best interest to correct this issue.
Jet will deny any exempt or frivolous claims and has a great team to fight for our brokers. However, we have an obligation to protect damaged parties and will make restitution for valid claims.
This does not clear brokers of their financial responsibility for damages they have caused by their actions. Much like the BMC-85 Trust Fund account being made whole, so must the surety carrier. Jet will notify the FMCSA of the broker’s failure to make payment on the claim and the license will become suspended until payment is made.
There are many different services that can help a broker run their business and increase efficiency. As mentioned above these can be key to limiting risk for a freight brokerage.
Transportation Management System - TMS software can help to provide a freight broker with a system to better manage loads and the business as a whole. These systems can source and track loads and invoices, process payments, credit checks, carrier vetting, rate loads, and much more. Prices vary significantly for TMS software depending on the services provided.
Load Boards - Load boards are widely used by carriers, shippers, and brokers. This is where shippers post available loads and carriers post available trucks.
Freight Factoring Companies - Freight factoring companies are highly useful for keeping brokers in business by purchasing broker’s invoices, paying off carriers on time, and collecting from the shipper. The contracts between broker and factoring companies can have flat fee rates or tiered fee rates.
Two contract options are available with factoring operations, recourse and non-recourse. Recourse has a higher percentage fee and typically at 90 days, the factoring company sells the invoice back to the broker if they cannot collect from the shipper. Non-recourse removes liability from the broker in the case the shipper does not pay the carrier through the freight factoring company.
Freight Broker Associations - The duties and purposes of each association vary. They provide services anywhere from government representation, model contracts, and small business referrals. These associations also present networking opportunities to help grow your business.