Freight Broker Insurance Requirements in 2024

Freight brokers operate in a high-stakes environment where the margin for error is slim. Understanding freight broker insurance requirements is critical for reducing risk, maintaining compliance, and protecting your business.

We look at the various types of coverage available to freight brokers, the limitations of coverage, and the best ways to protect your business with insurance.

Freight broker surety bond

A freight broker surety bond, also known as a BMC-84 surety bond, is a federal requirement for getting or renewing your freight broker license. This bond provides compensation to carriers and shippers if brokers fail to pay them or commit fraud that causes financial losses.

The minimum bond requirement is $75,000, but brokers don’t have to pay that upfront — it’s payable in annual premiums. Large brokers with significant financial assets can choose to pay the full $75,000 initially into a fund by filing form BMC-85.

The critical thing to remember is that a surety bond protects carriers and shippers, but it doesn’t protect you. You’ll need other types of freight broker insurance to shield you from financial loss and liability should something go wrong.

General liability insurance

General liability insurance is not a federal requirement, but it’s important to have. Coverage applies to damage and injuries at your place of business only — it doesn’t extend to shippers and carriers. If you lease the building where you work and accidentally damage the property, your liability insurance could cover the building owner’s damages.

Property insurance

If you own the building where your business operates, property insurance protects you against risks like theft, fire, and disruptions in business due to unexpected building damage. Insurers may offer a combined liability-property policy, which means fewer bills to keep track of.

Pay attention to policy language about water damage. Many property insurance policies don’t cover flood damage, so you may need an additional policy that covers floods if you’re in an area that has a flood risk.

Contingent cargo insurance

This coverage bridges gaps in motor carrier policies, covering cargo loss and damage when the carrier’s liability insurance falls short of covering the damage, or when the insurer denies the carrier’s claim. Without this coverage, a broker would be liable for any compensation owed to the shipper.

All-risk contingent cargo insurance

Contingent cargo insurance doesn’t cover everything that could go wrong with cargo. “All-risk” coverage, however, covers damage and losses due to improper packing and warehousing, theft, natural disasters, and more. It even covers perishable item spoilage in the event of mechanical failure or unexpected delays.

Vicarious auto liability coverage

Vicarious auto liability coverage protects you in complex liability cases resulting from a carrier’s actions if you had a “controlling interest” in the carrier’s work. For example, if a broker sets the carrier’s route or requires the carrier to report to them every four hours, that implies the broker is controlling the carrier. If the driver crashes into a car and injures two people, and the route was a factor in the crash, the broker could be vicariously liable for those injuries.

Many carriers have general liability policies of $1 million. In personal injury and wrongful death cases, $1 million may be inadequate to compensate victims, and that’s when attorneys may try to hold brokers and shippers liable. Vicarious auto liability coverage is what brokers need for these worst-case scenarios.

The cost of this insurance is unique to brokers based on the number of carriers they work with, their overall risk profile, policy limits, and other factors. Talking to an insurance agent is the best way to gauge costs for this coverage.

Workers’ compensation insurance

Workers’ compensation insurance is a legal requirement in many states for businesses that have employees. This insurance covers medical expenses and rehabilitation costs for employees injured on the job, lost wages, and disability benefits.

The premiums for workers’ comp policies are based on total payroll, with most small businesses paying around $1,000 a year. Depending on where you’re located, you may need to set up workers’ comp through a state agency instead of a private insurer.

Make sure you understand workers’ comp laws in your state, if applicable, because they usually require formal documentation of any injury, the circumstances surrounding it, and a medical professional’s diagnosis.

Errors & omissions insurance coverage

E&O insurance covers legal liabilities arising from professional errors, such as providing the wrong delivery address in a carrier contract, which subsequently makes the carrier late for a delivery and subject to a fee. This coverage varies widely in cost, from roughly $20 to $100 per month.

Factors that affect insurance costs

The costs of insurance can vary widely, based on several factors:

• The number of employees
• Business location (state and city)
• The level of coverage desired
• The dollar value of shipper goods
• Freight broker credit history

If you are a new broker that hasn’t established much of a credit history, your premiums may be higher than average. Previous business-related claims also tend to inflate premiums. 

How to find the right insurance for freight brokers

Many insurers offer discounts for customers with multiple policies. Sometimes, though, it may be better to choose different insurers for individual policies, based on their level of expertise. For example, some companies specialize in insurance for logistics and transportation businesses, whereas some insurers are mostly for non-commercial companies.

Researching insurance companies

Compare quotes from multiple providers when researching insurance companies. Read online reviews and ask trusted industry partners for recommendations.

Working with an insurance agent

Today, it’s easy to set up an auto policy online without ever talking to a human agent. But for commercial insurance that’s essential for protecting your career, you’ll want to talk to someone who can answer your questions and help you choose the best options.

Remember: Insurance premiums may be negotiable! The same skills you use when negotiating carrier rates could help you get a better deal.

Reviewing policy options

Scrutinize policy exclusions to understand what is and is not covered. If a policy meets all your needs but excludes one potential risk, you may be able to find an additional policy specifically for that risk. 

Minimize risk with Truckstop

As a freight broker, a lot of your risk comes from the people you partner with. Choosing reliable, trustworthy carriers and working with established and respected shippers is the foundation for minimizing risk for your business. Truckstop’s private load board vets all carriers, shippers, and brokers to reduce the risk of fraud and false credentials. Learn more about the benefits of managing your business with Truckstop.