It’s that time of year again, when it’s time to talk about freight broker bond renewal. Two years ago it would’ve been a rare occurrence for most freight brokers’ deadlines to align at the same time. However, many of you will remember the controversial MAP-21 law passed in 2013. It upped freight brokers bond amount and set a nationwide deadline of Oct. 1 with a grace period extended till Dec.1
Since freight broker bonds and licenses are renewed annually, this means yet another deadline is approaching for everyone who stayed in business after the $75K increase, i.e. for the majority of freight brokers. As renewal is an important expense for everyone, people often have various questions, so let’s look at some of them to give you a better idea and make your life easier.
#1 Is the freight brokers bond amount expected to go down again?
Back in 2013, the more than sevenfold increase shocked people, so some entertained the idea that a pushback could lower prices again. Unfortunately, even after several industry groups filed a lawsuit, a decrease failed to be negotiated. As a result, it’s probably unrealistic to expect a reduction to the broker bond amount anytime in the near future.
In any case, postponing renewing your bond for the very last minute with the hope that the FMCSA will bring the amounts down is not the wisest choice. In fact, starting early can give you more time to compare offers and prevent any potential lapse in bond coverage.
#2 How long can you wait before renewing the bond?
Technically, you should make your bond payment no later than 30 days before your previous freight broker bond expires. The BMC-84 Bond carries a 30-day cancelation clause, which means that the bond company must stay on the bond for an additional 30 days after sending out the cancelation notice to the FMCSA. This is why renewal payment is typically due 30 days before the expiration date of a policy. But as previously mentioned, waiting until the last minute to renewal your freight broker bond can be a bad idea.
The logic behind that is that many brokers tend to postpone renewal as much as they can, so there are many requests for renewal right before the deadline. This can cause delays, and there’s a chance your bond is not renewed on time. This is particularly true around October 1st of each year, as over 70% of the industry will be renewing their bond policies around this time.
Remember: it’s illegal to broker even a single piece of freight if your license expires. Your bond is filed electronically and your license status is available for everyone to see. Don’t risk losing business just because you missed a deadline. Staying ahead of the game will give you peace of mind.
#3 Should you shop around for a better deal?
Speaking of starting early, you may ask yourself if you should try a different approach this year by changing your surety provider.
The answer is: it depends. If you are happy with the services and the quotes of your current agency, it probably doesn’t make much sense to shop around. Additionally, if you shop around too much, and have a bunch of bond companies pull your credit, you may actually cause damage to your personal credit. If, however, you feel like you are paying too much, changing you surety agent to find a better fit for your company can reduce headaches and ultimately save you a lot of money.
Since they do most of the shopping for you, if you choose the right bond agency, they can negotiate a better deal on your behalf, as not all bond agencies are created equal or have access to the same specialty programs. Hint: Look for an agency that has many partnering sureties. The most trustworthy surety companies will be A-rated and T-listed.
#4 How much will it cost you this time around?
Even though the bond amount is set at $75,000 you are right to ask this question as freight broker bonds are most typically paid in either annual or quarterly premiums. The costs can vary from year to year based on a variety of factors: your credit score, potential credit issues, years of professional experience, and the strength and liquidity of your financial statements.
Finding a bond agency with access to the most aggressive rates is one of the biggest keys to saving money. Once you’ve found an agency you’re comfortable with, be sure to provide them with as much information as possible and your quote will be as accurate as possible. There are programs available to some agencies that are based solely on credit, but other markets require full underwriting with business financial statements. If you’ve received a credit based quote, but would like to try to reduce your premium, consider submitting additional documentation to strengthen your financial position. This can often have a positive impact on what you end up getting quoted.
Have many more questions that are left unanswered? Be sure to check out this full guide to freight brokers bond renewal which goes into great detail. If something is still unclear, leave us a comment in the section below, and we’ll do our best to help.