Freight Brokers: How to get a Surety Bond
by, 09-20-2013 at 10:53 PM (13734 Views)
As FMCSA confirms October 1st as the deadline for freight brokers to obtain a $75K bond, it is important to stay compliant so as not to receive notice if the bond is not secured. FMCSA stated that this "increase in financial security for freight broker bonds must be placed by October 1st."
Otherwise, any broker or forwarder found to be non-compliant will not be able to retain their licenses. Proof of bonding is a pre-requisite to licensing, so make sure your $75,000 freight broker bonds are in place when being verified. Read on to learn more.
4 Easy Steps: Getting Started
- Find your bond type - For example you need a bond required by the government to open your business, it does not mean a bond for a specific job or contract, and it's not a bond required by the courts. You need a "License and Permit bond" or "Miscellaneous commercial surety bond"
- Get an instant quote and online approval at JW Surety Bond. You can also pay online
- Read and Sign the bonding company's Indemnity Agreement
- Receive the bond
What does a Surety Bond Cost?
Surety bond will depend on the size and type of the bond, and the applicant. To determine your actual cost, you will need to apply online because bonds are NOT a one size fits all product. You can also use JW Surety Bond free estimate tool to see a range of costs. It will calculate the ranges you are looking for on your specific bond type and amount.
What is Indemnity Agreement?
It is important to know that a surety bond is a form of credit to you. It is not insurance. An Indemnity Agreement protects the government and its citizens from your actions. By signing this, you agreed to pay for any claims and legal costs the bonding company incurs from your customer's claims. Indemnity agreements are an industry standard so you won’t find any company that won’t make you pay for claims. It is a "Bond", "not Insurance".
Avoid claims at all cost. Why?
-Remember without the bonding company to guarantee you, you would have to prepare cash for any claim made against your business. Now, you will only pay the bonding company a percentage of the bond amount so they will vouch for you. Either way you are responsible for your claims. To avoid any claims, make sure you follow all the rules of the government and deal with your contracts professionally. Always document everything, each step of the process if there is any dispute with the client. And try to resolve it if possible before it can even become a claim.
If it is still not resolved, the bonding company will listen to the dispute and will let you provide your side of the story as well. If the bonding company finds you are right, they will help you fight it. Otherwise, they are required to pay the claim. After which, they will go to you for reimbursement of the claim amount and legal fees. Hence, the Indemnity Agreement.
Top 5 Things You Need to Know
No. 1: Price Can Vary Drastically
o What the Bond Guarantees
o The Applicant's Credit Strength
o The Bond Size
o The Agency
No. 2: Surety Bonds are not insurance for you
- Bond is a form of credit to you. If the claim is filed, the surety company will pay the claim first, and then will look to you for reimbursement.
- This should not be confused with Fidelity Bonds, which are insurance for you or your clients. These bonds are not required by the government
No. 3: Provide ACCURATE Information
- Avoid receiving an inaccurate quote by providing accurate detail about your business or personal information. Inaccurate documents could also cause your bond rejected by the obligee. This will cost additional money and time to correct.
No. 4: Weak business financials can prevent a bond from being approved. But don’t fret.
- Personal credit and business financials are always analysed
- Credit issues can result in higher rates and even inability to be approved for some bonds. See how JW Surety Bond can help you if your are in this situation.
No. 5: Work with professional partners
-The bond agency you applied with matters a lot. It can affect your access to the best sureties, low bond rates, and fast turnarounds.
- It is best to work with an attorney and other professionals who are familiar with the construction and contract loss. This is helpful as they can defend your rights in the event of any dispute.
Note: The above is NOT a paid advertisement nor was it written, nor requested by JW Surety Bond. RoadTrucker researched companies and found JW Surety Bond to be one of the more reputable Surety Bond businesses. We did approve their advertising on our Trucking forum as a direct result of this research. There are many other good Surety Bond businesses for you to choose from.
Author: Marie A. Morales
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