Freight Broker Liability Insurance

Freight broker liability insurance provides coverage when a freight forwarder receives a lawsuit because of property damage, personal injuries, or negligence. Liability insurance policies carriers give to freight brokers are:

Contingent cargo insurance
Errors and omissions insurance
Contingent auto liability insurance
General liability insurance

Also read: Car Hauler Insurance: Cost & Quotes From $11

Contingent Cargo Insurance

When the cargo becomes lost or damaged while under the care, custody, and control of a freight broker, clients can file a lawsuit to get reimbursement for any resulting losses. In most cases, the lawsuit can be as expensive as $100,000 or more.

The liability policy in freight broker insurance that will cover lawsuits after cargo in transit got lost or damaged is contingent cargo insurance. Through this, the freight broker can pay the full value of the lost or damaged products and goods. The policy limit can be as low as $100,000. However, insurance companies that specialize in insuring freight brokers provide $1 million up to $2 million.

Note that contingent cargo insurance will only provide coverage if the shipping carrier won’t cover the freight broker using their insurance policy. Also, contingent cargo insurance will only provide coverage for instances of loss or damage while the cargo in question are in transit.

Freight Broker Errors and Omissions Insurance

Aside from suing for the cost of their lost or stolen goods, clients and other concerned persons can also sue freight brokers for negligent hiring. Clients expect freight brokers to hire only the best motor carrier. And if it’s proven that the clients suffered damage or loss because the freight broker worked with an underperforming carrier, legal liability can be incurred. The cost of negligent hiring lawsuits isn’t a joke. Here’s an example:

Heyl Logistics, a freight broker, had to pay $5.2 million after a truck it hired caused an accident and killed a person

Freight broker errors and omissions insurance is the policy that will cover incidents of negligent hiring. It gives $1 million up to $2 million so that a freight broker can pay for attorney fees, other legal costs, and compensation to the concerned party.

Freight broker’s errors and omissions insurance won’t only cover negligent hiring. It can also cover a breach of contract. However, its terms will only apply if there's a failure to do the tasks or deliver services in the deal.

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Contingent Auto Liability Insurance

Freight brokers contract motor carriers to ship the goods of their clients. So, it’s important to ask, “ Will the freight broker have legal liability over accidents the motor carrier caused?”. > The answer is yes.

There are a lot of ways in which freight brokers can have legal liability over accidents their motor carriers caused. Examples are accusing the freight broker of failing to check the background of the motor carrier, treating the freight broker and motor carrier as a joint venture, and treating the actions of the motor carrier as the actions of the freight broker ( acting in concert & civil conspiracy ).

Out of all freight broker insurance coverages, the one policy that will help is contingent auto liability insurance. Contingent auto liability insurance kicks in when the freight brokers face legal liability for the accidents their motor carriers caused. The policy limit of contingent auto liability insurance is $500,000 to $5 million.

Freight Broker General Liability Insurance

Freight broker general liability insurance provides protection from slander, libel, personal injury claims, and property damage claims. This policy provides $1 million up to $2 million coverage.

Should Freight Brokers Purchase a Bond?

The Federal Motor Carrier Safety Association requires all who provide freight brokerage services to have freight broker bond insurance. To specify, the agency mandates that every freight broker must have a $75,000 freight broker surety bond insurance.

So how does freight bond insurance work? In simple terms, a bond sees to it that the freight broker can pay any financial obligations to the client in the event of jettison, missed delivery, or failure to complete a service. Freight brokers can use their bonds to pay for the cost of lost cargo or damaged cargo, reimburse the client for business losses because of missed deadlines, and many more.

According to freight insurance brokers, the cost of a surety bond is 1.5% - 2% of the total bond amount. This means that since the Federal Motor Carrier Association requires $75,000, the cost of a surety bond will be `$1,125 or $1,500 a month.

Also read : Pet Sitting Insurance and Bonding

Freight Broker Insurance Requirements

Know that you can’t opt to get insured immediately. You must satisfy some freight broker insurance requirements to qualify.

The primary requirement for a successful freight broker insurance application is a freight brokerage license from the Federal Motor Carrier Safety Association. These are what you need to do in case you don’t have a license yet and want to get one:

Step 1: Register your freight brokerage at the Unified Registration System

Step 2: Get a surety bond or trust fund agreement from freight insurance brokers or carriers (form BMC-85)

Step 3 : Designate a Process Agent (FORM BOC - 3)

Note that the application for a freight broker license will cost $300, which is not refundable. Moreover, you’ll have to wait for 4 - 6 weeks for the application process to finish.

There are other insurance requirements for freight brokers. For instance, carriers will request you to get a business certification from where you’re living. This is important as it allows them to verify your business location.

You’ll also have to specify to the carrier which businesses you provide freight services. And so, carriers will ask you to send some clientele documents for verification. Why is this? Specifying which businesses you provide freight services helps to determine insurance rates. Note that freight brokers shipping perishable goods have more expensive premiums than those shipping non-perishable goods.

Is Truck Broker Insurance The Same as Freight Broker Insurance?

Consumers use truck broker insurance and freight broker insurance interchangeably. Therefore, the answer is yes.

However, there’s one company that offers stand-alone truck broker insurance along with its freight broker insurance - TransInsurers. According to this company, its truck broker liability insurance is a hybrid primary liability policy that addresses the truck broker's general liability arising out of the ownership and use of a truck by the motor carrier of a brokered cargo move, in conformity with a written truck brokerage agreement . TransInsurer’s truck broker liability coverage will answer the cost of bodily injury and property damage.

Freight Broker Insurance Cost

The average freight broker insurance cost for a $1 million general liability policy is $1,300 a year or $108.33 a month
Contingent cargo insurance for freight brokers is $125 a month or $1,500 a year
Freight brokers pay $47.25 a month or $567 a year for errors and omissions insurance

Best Freight Broker Insurance Companies

It’s best to check out numerous companies before purchasing your freight broker insurance. Who knows? You might find freight broker insurance companies that offer comprehensive coverage at cheap rates. With that being said, here’s a quick outlook of the best freight broker insurance companies.

Freight Broker Insurance Progressive

Insuranks rating	8/10
Best for	Custom freight broker insurance limits and deductibles
Average Cost	$89
Year Founded	1937
CEO	Tricia Griffith
Headquarters	Mayfield, Ohio, United States
Customer Support	1-800-444-4487 and customer service portal
AM Best Rating	A+ ( superior)
BBB Rating	D -
Number of Complaints	1,313

Why Get Insured by Progressive?

Progressive offers insurance for freight brokers and truckers
Custom policy limits and deductibles
Covers loss or damage to client’s cargo due to fire, theft, collision, and hitting or running over

Why Take Progressive with a Grain of Salt?

Has numerous exclusions on its insurance for freight brokers and truckers

Freight Broker Insurance State Farm

Insuranks rating	9/10
Best for	Freight broker surety bonds
Average cost	$45
Year Founded	1922
CEO	Michael L. Tipsord
Headquarters	Bloomington, Illinois, United States
Customer Support	800-782-8332 and customer service portal
AM Best Rating	A++ ( superior)
BBB Rating	B
Number of Complaints	538

Why Get Insured by State Farm?

State Farm offers surety bonds for freight brokers such as contract and performance bond, and license and permit bond
Covers freight brokers through its distributor insurance program that offers motor truck liability coverage, business liability coverage, equipment breakdown, and more
Best freight broker insurance for bonds

Why Take State Farm with a Grain of Salt?

Doesn’t have a stand-alone freight broker insurance

Freight Broker Insurance TransInsurers

Insuranks rating	7/10
Best for	Freight brokers, truck brokers, and transport brokers
Average cost	$83
Year Founded	2002
CEO	N/A
Headquarters	13841 Hull Street Rd #3a, Midlothian, VA 23112, United States
Customer Support	866-748-4200 or mail@transinsurers.com
AM Best Rating	N/A
BBB Rating	N/A
Number of Complaints	N/A

Why Get Insured by TransInsurers?

Transportation broker liability insurance for freight brokerage businesses offer trust funds, broker funds, general liability, contingent cargo, and more
An insurance company that specializes in the exposures common in freight forwarding businesses
Partner of accredited insurance companies like AIG, Progressive, and Zurich

Why Take TransInsurers with a Grain of Salt?

No online third-party reviews from business watchdogs

How to Get A Freight Brokerage Insurance Quote Fast?

We are dedicated to helping consumers get a freight brokerage insurance quote fast. And so, we included a free generator on this page. All you have to do is click the “Get Quotes” button and provide some details. After finishing, you’ll receive the quotes from the top freight broker insurance carriers sorted from the cheapest to the most expensive or the most comprehensive to the least comprehensive.

References

Justin J. Kaszuba. (n.d.). Emerging trends in freight broker liability in freight broker liability. Retrieved February 10, 2022, from https://www.dcba.org/mpage/v31-Justin-Kaszuba
U.S. Bureau of Labor Statistics. (2021, March 31). 43-5011 cargo and freight agents. U.S. Bureau of Labor Statistics. Retrieved February 10, 2022, from https://www.bls.gov/oes/current/oes435011.htm
Download | academic Commons - Columbia University. (n.d.). Retrieved February 10, 2022, from https://academiccommons.columbia.edu/doi/10.7916/D8V12FDN/download