Federal rules require a freight broker to hold a $75,000 surety bond or trust. They do not require a property broker to carry insurance. In practice, most shippers will not work with a broker that has none, and one uninsured claim can close a small brokerage.
This guide covers the policies brokers commonly carry and what each one is for. It is general information, not insurance advice: speak to a broker who specialises in transportation.
Bond vs insurance
They are often confused.
The bond protects other people. It pays carriers and shippers if you fail to pay them, and you must repay the surety. See the freight broker bond explained.
Insurance protects your business. It pays for covered losses and for defending claims against you.
You need the bond to get authority. You need insurance to win customers and to survive a bad load.
The policies freight brokers carry
Policy | What it covers | Why brokers carry it |
|---|---|---|
Contingent cargo | Loss or damage to freight when the carrier's cargo insurance does not pay | Carrier policies have exclusions, lapses and limits; shippers look to the broker next |
Contingent auto liability | Claims against the broker after a truck accident involving a carrier it hired | Brokers are regularly named in accident lawsuits |
General liability | Injury or property damage arising from the business itself | Commonly required in shipper contracts |
Errors and omissions | Financial loss caused by a mistake in the broker's work | Covers professional errors such as wrong instructions or a missed requirement |
Cyber | Costs from a breach, ransomware or payment fraud | Brokerages run on email and hold customer and carrier data |
Workers' compensation | Employee injury | Required by most states once you have employees |
Contingent cargo
The carrier is normally responsible for the freight, and its cargo policy should pay a claim. "Contingent" means your policy responds when the carrier's does not: the policy had lapsed, the commodity was excluded, the limit was too low, or the "carrier" was a fraudster. It is the cover shippers ask about first.
Read the conditions. Many contingent cargo policies require you to have verified the carrier's authority and insurance and to hold a signed agreement. If you skipped the checks, the claim may be refused.
Contingent auto liability
If a carrier you hired is in a serious accident, the injured party's lawyers may sue everyone involved, including the broker, arguing that the carrier was chosen carelessly. This policy pays for defence and covered damages. Careful, documented carrier selection is both your best defence and what insurers look at when they price it.
Errors and omissions
This covers financial loss from your own mistakes: the wrong delivery date passed on, the wrong equipment booked, a temperature requirement left off the rate confirmation.
What shippers ask for
Larger shippers set insurance requirements in their broker contracts. Expect to be asked for:
A certificate of insurance listing your policies and limits.
Contingent cargo and general liability at stated minimum limits.
The shipper named as certificate holder, and sometimes as additional insured.
Proof that you require minimum insurance from your carriers.
Check requirements before you quote. Raising a limit after you have won the business is slower and dearer.
What affects the cost
Revenue and load volume.
The freight you handle: high-value, temperature-controlled and hazardous goods cost more to insure.
Claims history.
Your carrier vetting process. Insurers ask how you check authority, insurance and identity, and whether it is documented.
Limits and deductibles.
How to keep premiums and claims down
Vet every carrier, every load, and keep the evidence. Authority, insurance and identity checks, with dates. Start with a complete carrier packet.
Use a written broker-carrier agreement with insurance requirements and a no re-brokering clause.
Match the carrier's cargo limit to the value of the load. Do not put a high-value load on a carrier with a low limit or a relevant exclusion.
Guard against fraud. Stolen and double-brokered loads are a major source of claims. See what double brokering is and how to prevent it.
Keep every document with the load. When a claim comes, the rate confirmation, bill of lading, proof of delivery and your vetting record decide it.
A TMS that records the checks and blocks carriers with expired insurance makes this routine. See our guide to freight broker software.
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