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?
Anyone planning to operate as a freight broker in the United States must first obtain an “operating authority” (which serves the same purpose as a license) from the Federal Motor Carrier Safety Administration (FMCSA).
What Are the Steps in the Licensing Process?
All freight broker operating authority applications are submitted and processed through the Unified Registration System (URS). There are a few things you�ll need to do in preparation for starting an application:
- If you plan to launch your own freight brokerage, you�ll first need to choose a legal structure, establish a legal business entity, and register it with the Texas�Secretary of State�s Office.
- You�ll also need to register your brokerage with the�IRSand the Texas�Comptroller of Public Accounts.
- There are two types of freight broker operating authority: �Broker of Household Goods� and �Broker of Property (except Household Goods).� Every freight broker needs to decide which one to apply for, or apply for both.
- You�ll also need to choose a process agent in every state where you will have an office or write contracts or a blanket process agent company that can represent you in any state. List all process agents on a single Form BOC-3�(Designation of Process Agents) to be filed with FMCSA. If you choose a blanket company, they can do this for you.
- Finally, purchase a $75,000 freight broker bond (Form BMC-84) or provide FMCSA with a Trust Fund Agreement (Form BMC-85), but that requires tying up $75,000 in cash or credit.
Now you�re ready to apply for a freight broker authority through the Unified Registration System (URS). Once you’ve competed the application, and have paid the registration fee (currently $300), URS will generate your MC number (MCN) immediately. Your operating authority documents should arrive by U.S. mail in about 10 business days.
Why Is a Freight Broker Surety Bond Required?
A BMC-84 freight broker bond provides financial protection for FMCSA, the bond�s �obligee,� and for the shippers and carriers that do business with you. The bond is a legally binding contract that guarantees your compliance with all FMCSA regulations. It also obligates you to pay all valid claims against the bond for damages caused by your noncompliance.
How Are Freight Broker Bond Claims Paid?
Although the freight broker (the �principal�) purchasing a BMC-84 bond is legally obligated to pay all valid claims, the bond�s guarantor (the �surety�) has guaranteed the payment of claims. So the usual practice is for the surety to pay a claim initially and then be reimbursed by the principal. Not repaying that debt can result in the surety suing the principal for the claim amount plus legal fees.
What Does It Cost?
The annual premium for a BMC-84 freight broker bond is a small percentage of the $75,000 bond amount. That percentage, the premium rate, is determined by the surety through an underwriting process. The surety�s main underwriting concern is the risk of not being repaid for claims paid on behalf of the principal. The best measure of that risk is the principal�s personal credit score.
The average premium rate for applicants with good credit is in the range of 2% to 4%. Someone with lesser credit presents a greater risk to the surety and will be assigned a higher premium rate.
Request a�convenient online quote today, or call and speak with one of our surety bond experts who can answer your questions about freight broker BMC-84 surety bonds.