How to Get the Right Insurance Coverage for Your Freight Brokerage


Insurance coverage is an important part of any freight brokerage business. You need to get insurance for two reasons. First, so you could qualify for certification and obtain legitimacy. Second, so you are protected in case something goes wrong and you are deemed to be the liable party. Here are a few insurance rules all freight brokers should remember.

Consult an Expert

Make sure that you talk to your insurance agent, attorney, and accountant before you get a new insurance coverage or modify an existing insurance policy. Insurance is costly and you should make sure you are fully informed before you make a decision about it. Know all your options and weigh them carefully so you can pick the one that best suits your circumstances.

Know the Coverage Options You Need

There are numerous types of insurance policies you can choose from. Some of them are essential, some of them are not, and some of them are in between. List down those that your business needs and forget about the rest. Then rank those on the list by order of importance so you know which ones to prioritize, especially if you are on a tight budget and can’t afford all of them. Here are the coverage options you should consider:

  1. Property and General Liability Insurance – your business either owns or leases property so property insurance is a must. You will also need general liability insurance for your premises and operations. Bundling the two types of coverage will often lead to significant savings. Talk to your insurance agent for insurance quotes and policy recommendations.
  2. Vicarious Auto Liability Insurance – a freight broker can still be held liable if he is found guilty of negligent hiring. Vicarious auto liability insurance will protect you from such liability. There are countless varieties of vicarious auto liability insurance available so make sure you review the terms and conditions very carefully. Some offer too little coverage while some offer too much. If you find one that offers the right amount of coverage, you can opt of umbrellas to expand your liability limit. Insurance umbrellas generally come in $1 million increments.
  3. Workers’ Compensation Insurance – this is a legal requirement for any freight brokerage company that has at least two employees. Some states, however, do not require carrier companies to have workers’ liability insurance. Dealing with such carriers puts you at risk. If the carrier defaults on its payment, the trucker can sue both you and the carrier. Transact only with carriers that are covered by this insurance. If it cannot be helped, have the uninsured carrier sign a waiver exempting you from all liability in the case that carrier defaults on paying its truckers.
  4. Contingent Cargo Insurance – this protects you from the gaps a carrier’s policy might not cover. The coverage offered by this type of insurance greatly varies. And as a freight broker, you are not legally liable for cargo loss and damage claims so you can have those taken out from your policy. Make sure your contingent cargo insurance policy only covers the areas where there are chances that you’ll be held liable.
  5. Errors and Omissions Insurance – you can use this to cover claims that are not found under any other policy such as negligence claims and error claims.

Know the Coverage Options You Don’t Need

There are insurance options you will never use in your practice as a freight broker so paying for them will be nothing but a waste of money. Here are insurance policies you shouldn’t bother with:

  1. Excess Auto Liability Insurance – this is usually bought to compensate for the carriers unsatisfactory coverage. For example, a shipper demands a carrier with $1 million auto liability insurance but the carrier only has a $500 thousand policy. You can get $500 thousand excess auto liability insurance to make up for the deficit. However, you should never do so. Never buy insurance for the benefit of a carrier. The better option would be to find another carrier that can satisfy the shipper’s demand.
  2. Carrier-supplied Insurance Certificates– never rely on certificates of insurance provided by a carrier. There is no way of telling if his certificate is up-to-date or not. Contact the carrier’s insurance agent and check for yourself.

Follow the above rules for insurance brokers and you’ll be one step closer to freight brokerage success.

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