Are you a freight broker or forwarder? Does your current surety bond expire soon? Surety expert Bob Wolf offers some insider tips for your renewal, including how you could net a lower premium for your bond.
What can freight brokers do to lower their surety bond premiums?
If your business has been licensed with the FMCSA for more than a year and you have verifiable financial stability, you will likely qualify for the industry’s lowest rate. To verify your financial credentials, your surety provider will start by reviewing your credit report. Due to the risk associated with this type of bond, most surety providers also require a review of current personal and business financial statements before offering a quote. As a result, you should always keep your credit in good standing and provide your surety agent with current personal and business financial documentation. If you are not able to provide this documentation, you might not qualify for the industry’s lowest rate. Your surety provider will also check with the FMCSA to evaluate claims history and ensure there have been no previous issues. You should also know that high claims activity in some states has resulted in higher rates for even the most qualified applicants. As always, new businesses that have never been licensed with the FMCSA could receive higher rates due to their lack of industry experience.
If a broker meets those requirements, what will their estimated premium be?
Some surety providers are offering more competitive rates this year than they have in previous years. Qualified applicants in low-risk states can expect to pay a rate of just 1.25% – or $938 annually. Applicants with financial issues can expect annual premiums that start at $1,200. I cannot stress enough that your credit report and ability to provide personal and business financial statements are the most important factors that affect your premium.
Why do so many freight brokers need to renew their bonds by October 1?
Prior to 2013, these bonds were required in the amount of just $10,000. In July 2012, the MAP-21 (Moving Ahead for Progress in the 21st Century Act) was passed, and it drastically increased the federally required bond amount to $75,000. However, the act gave brokers and forwarders until October 1 of the following year to file the increased bond. This bond does not require a set expiration date, meaning the government does not require the bond to expire annually on September 30. It just so happens that many brokers and forwarders renew their bonds at the beginning of October based on when they filed their new increased bond in 2013.
Although there has been a great deal of buzz in the industry about renewals lately, don’t be alarmed if you do not need to renew your bond at this time. For example, because these bonds have a standard 1-year term, if you started your business and filed your bond in April 2013, your bond would renew annually in April.
Is it up to the broker to remember their bond’s expiration date and request renewal?
Your surety provider should send you a reminder notice 60-90 days before your bond’s expiration date. This gives you time to get your financial statements in order so your agent can shop multiple carriers to find the best deal for you. In recent months, we’ve been able to save clients thousands of dollars on their renewal premium simply by shopping their account with multiple surety companies.
If you’d like to speak with a surety expert like Bob to find out if you’re overpaying for your bond, you can call 1 (800) 308-4358 any time from 7 a.m. to 7 p.m. CST. Or, you can request your quote instantly online now by clicking this link.
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