Freight broker insurance FAQ
Plain-English answers to the most common questions about the freight broker insurance stack, what each line covers, and how the pieces fit together.
What insurance does a freight broker need?
Six standard lines: BMC-84 surety bond (federally required, $75K), contingent auto liability ($1M-$5M typical), contingent cargo ($100K-$500K typical), general liability ($1M typical), errors and omissions, and cyber liability. Post Montgomery v. Caribe Transport, the contingent auto line moved from optional to effectively required.
Is the freight broker bond the same as insurance?
No. The bond is a three-party payment guarantee in which a surety company pays out claims against the broker up to the bond limit, then seeks reimbursement from the broker under an indemnity agreement. The broker is on the hook for repayment. The bond is a credit facility, not protection.
Can I run my brokerage with just the BMC-84 bond?
Legally, the bond is the only federally required financial responsibility. Practically, no. Without contingent auto liability you are uninsured for the most significant exposure category post Montgomery v. Caribe. Without general liability you cannot satisfy most shipper contracts. Without contingent cargo you absorb cargo claims that exceed the carrier's coverage.
How much does freight broker insurance cost annually?
For a typical small broker: bond $1,000-$10,000, general liability $500-$1,500, contingent auto liability $3,000-$8,000 at $1M, contingent cargo $500-$1,500, E&O $500-$2,000, cyber $500-$1,500. Annual total roughly $6,000-$24,500. Hazmat and oversize brokers pay materially more.
What is the difference between primary and contingent auto liability?
Primary auto liability is carried by the motor carrier on the vehicles they own and operate. Contingent auto liability is carried by the broker and responds when the carrier's primary policy fails. Brokers do not own trucks; they do not need primary auto. Brokers face liability for negligent carrier selection; they need contingent auto.
Does my homeowners or umbrella policy cover broker liability?
No. Personal lines policies categorically exclude business operations. The umbrella over your homeowners and auto does not respond to commercial broker claims. Commercial coverage is required.
What are additional-insured endorsements and do I need them?
An additional-insured endorsement extends a policy's coverage from the named insured to a third party. Common requirements: shippers require named status on the broker's GL and contingent auto; brokers should require named status on the carrier's primary auto. The endorsement is the binding artifact, not just the certificate's reference to it.
Will my broker bond cover a lawsuit if a carrier hits someone?
No. The federal broker bond responds to carrier non-payment claims and certain shipper cargo claims. It does not respond to third-party bodily injury, wrongful death, or negligent-hiring liability. Contingent auto liability is the line that responds to those claims.
What is reefer breakdown coverage and do I need it?
Reefer breakdown is an endorsement on cargo insurance that covers cargo loss from refrigeration-unit failure. Standard cargo insurance often excludes reefer breakdown without the endorsement. Brokers regularly running refrigerated freight should require the endorsement on carrier cargo coverage and consider it on their own contingent cargo policy.
Should I get cyber liability insurance?
Yes, increasingly. Email fraud and wire-transfer fraud against freight brokers has become a material loss category in recent years. $1M coverage is inexpensive relative to the exposure and increasingly required by larger shipper contracts.
How often should I review my insurance stack?
Annually at minimum, at renewal. After Montgomery v. Caribe, brokers should review limits sooner. Many brokers carrying $1M contingent auto pre-Montgomery should consider moving to $5M given the verdict landscape and underwriting market tightening.
What is contingent auto liability written on an admitted vs surplus lines basis?
Admitted carriers are licensed in the state and subject to state-guaranty-fund protection. Surplus lines carriers are not state-licensed and not state-guaranty-fund-backed. Most contingent auto liability is written by surplus lines carriers. The coverage works the same but the carrier insolvency risk profile differs.