Question
Maybe I'm not looking in the right area (Great West / Joe Morton are right in my back yard)but I can't get quotes on broker's contingent cargo insurance, for a stand alone brokerage. Currently my husband is an agent but wants to go it alone in the near future. We would like some idea how much this insurance will cost. Also, we need the insurance to get the authority. I would appreciate any help on this, I don't know where to ask...Thank you,
Answer
You will need the Property Broker's Bond. There are markets that will write these bonds, but I caution you that your credit must be "EXCELLENT". Brokers have been going out of business due to the poor economic climate of the trucking industry. Bonding companies have tightened their requirements. I am told, you can post a cash deposit in place of the bond, but I believe that's $10,000.
Contingent Cargo is also available and is subject the the specifics of the brokerage operation.
It is important that you have a business plan and brainstorm all the issues before investing into this new venture.
Best of luck,
Connie
Answer
Just so I don't misinform anyone, I found out the cargo contingency insurance is not legally neccessary to get Broker Authority, but many customers will require it. As for the bond, I knew we needed that, but not that it was difficult to obtain. There is an option called a BMC-85 Trust Fund Agreement but I'm not sure what that entails.
Answer
Based on my experiences, Contingent Cargo is not required. We have had several clients obtain Brokers Authority and initiate their business successfully without Contingent Cargo.
You may want to explore this in your business plan allowing for an option to go either way.
Answer
BMC-85, the Trust Fund, is just what Connie was talking about. You put up $10,000 cash either directly with the Federal Govt. or with a surety company, the trust fund is then formed and filed so that the Brokerage License can be issued. Sometimes you can get a surety company to post the bond if you are willing to have a $10,000 CD in their name and yours. Or, if you can get your bank to write you a guarenteed letter of credit, usually by having $10,000 in the bank, a surety will write the bond for a minimum premium of $250 a year. This bond is required to be in place at all times in order for your brokerage license to remain in effect.
The contingent cargo is not necessary to go into business. MANY brokers, both large and small operate w/o it. It is possible that some shippers will require it, but until you can afford it you can avoid them.
I recently obtained a quote for contingent cargo and it was something on the order of $15 for every $1000 of revenue up to the first million of revenue earned, but I would have to recheck, that was at least three months ago.
Hope that this helps.
Mel