Trucking can be a tough business, with unique risks that require mutual trust between you and your customers. Trucking surety bonds –
Back up that trust and can also help make sure your operation is in compliance with regulations that may require them.
How Do Truck Bonds Work?
Truck bonds, like all surety bonds, are a type of insurance protection that act as a promise by one party to be liable for the potential failure of another. They form a legal agreement between three parties:
- The Principal, or the individual or trucking business who has agreed to perform a professional service. This is the party that pays for the Surety Bond.
- The Obligee, or the person/business the service is being performed for and risks damage if the service is not performed correctly.
- The Surety, generally an insurance company, the party that provides compensation to the obligee if the principal does not complete the service or does so in a way that’s incomplete or incorrect.
A big difference between Surety Bonds and other types of insurance is that the Principal retains the risk, not the insurance company. If the principal fails to complete the work as agreed upon, the obligee is able to recover damages from the surety up to the bond amount, and the principal is required to pay the surety back.
Types of Truck Bonds
There are many different types of bonds that might be appropriate or required for operating a trucking business. A few of the most common in the industry are:
- Freight Broker Bonds – Often referred to as BMC-84 bonds, these are required by the Federal Motor Carrier Safety Administration for freight brokers. They protects shippers and trucking companies if they aren’t compensated for the work they’ve performed. These bonds are required to cover at least $75,000 in potential damages.
- COD Delivery Bond – These bonds provide shippers with a guarantee that a cash-on-delivery, or COD, payment from a receiver will be delivered to them by the trucking company.
- U.S. Customs Bond – These guarantee to US Customs and Border Protection that any money due from a trucking company will be paid.
- Oversized Highway Permit Bond – These bonds are required by many states to encourage trucking companies to take appropriate caution in hauling oversized or overweight goods, and makes sure the state is compensated for damage caused to roads, highways, or bridges by your haul. Since these are often issued on a state level, you might need a bond for every state an oversized load is hauled through.
Every trucking operation is different, of course, and our agents can help you learn more about what bonds yours might need.
What Do Truck Bonds Cost?
As with most insurance, the cost of a Truck Bond is influenced by a variety of factors, like the type of bond, the amount of risk involved, the principal’s credit score, and the length of time the contract is in effect.
Our Team has the experience and knowledge to take the guesswork out, and make sure you get the most important product of all: Peace of mind. Talk to our agents today to learn more and for help finding the right Truck Bond for your business or project.