Learn how to become licensed as a freight broker, and speak with an Single Source Insurance agent today about purchasing the BMC-84 bond you�ll need to operate as a freight broker.
Who Needs a Freight Broker License?
Before you can work as a freight broker in Illinois, or in any other state, for that matter, you�ll need to obtain an �operating authority� from the Federal Motor Carrier Safety Administration (FMCSA). If you want to learn more about being a freight broker, click here.
What Are the Steps in the Licensing Process?
There are a few things you�ll need to do in preparation for applying for your operating authority. These include:
- Deciding whether you will create a legal business entity and establish your own brokerage firm, or take a job as a freight broker in a firm owned by someone else. If you choose to become an entrepreneur, you�ll need to form a new business and register it properly with both the Illinois Secretary of State and the Illinois Department of Revenue.
- Deciding whether you will apply for your operating authority as a �Broker of Household Goods� or as a �Broker of Property (except Household Goods)� or both.
- Selecting a process agent in every state where you will maintain an office or write contracts. You might want to select a blanket process agent company that can accept legal service on your behalf in any state. If you opt for a blanket agent, they can fill out the required Form BOC-3�(Designation of Process Agents)and submit it to FMCSA on your behalf. If you designate individual process agents in multiple states, you’ll need to list all of them on a single BOC-3 and submit it with your application.
- Purchasing a freight broker bond (Form BMC-84). All freight broker bonds are in the amount of $75,000. Alternatively, you can provide FMCSA with a Trust Fund Agreement (Form BMC-85), but that requires tying up $75,000 in much cash.
Once you have accomplished all of the above, you�re ready to set up an account and sign in to the Unified Registration System (URS) and submit your application and supporting documents and pay the registration fee (currently $300). You’ll get your MC number (known as the MCN) from URS immediately. Your operating authority documents should arrive in the mail within 10 business days.
Why Is a Freight Broker Surety Bond Required?
A BMC-84 surety bond is a freight broker�s pledge to operate in accordance with FMCSA regulations and to compensate FMCSA (the bond�s �obligee�), shippers, carriers, and others incurring� monetary loss because the freight broker (the bond�s �principal�) violated of any of those regulations.
How Are Freight Broker Bond Claims Paid?
The third party to a freight broker bond is the company (the �surety�) guaranteeing the payment of claims, though the legal obligation to satisfy valid claims belongs solely to the principal. As the guarantor, the surety normally pays a claim initially and is subsequently reimbursed by the principal. If not reimbursed on schedule, the surety can take legal action against the principal.
What Does It Cost?
You�ll pay an annual premium for a freight broker bond that is a small percentage of the $75,000 bond amount. The surety assigns a premium rate to each bond applicant based largely on his or her personal credit score. With a high credit score, the underwriting assumption is that the risk of the surety not being repaid by the principal is low, which results in a premium rate that typically is in the range of two to four percent. A low credit score is indicative of a higher risk to the surety, which warrants a higher premium rate.
Our surety bond professionals will get you the freight broker (BMC-84) bond you need at a competitive rate.