Freight Broker Insurance: Protecting Houston Logistics Operations From Bond to Cargo Liability

Houston freight brokerages are sitting on a goldmine — and a minefield. The Port of Houston ranks as the largest port in the U.S. by foreign waterborne tonnage, funneling goods across Texas and into every major distribution corridor in the country. That volume means massive revenue potential for freight brokers, but it also means exposure that can sink an uninsured operation overnight.

We work with freight brokerages managing anywhere from 50 to 500+ carrier relationships, and the coverage gaps we see are staggering. Most brokers think their $75,000 surety bond handles everything. It doesn’t even come close.

• A single cargo claim on a high-value electronics shipment can exceed $250,000 — more than three times that bond
• Carrier vetting failures expose brokers to vicarious liability when an underinsured trucker causes an accident
• Contractual indemnification clauses in shipper agreements create obligations standard GL policies won’t touch
• Cyber exposure from TMS platforms and load boards opens data breach liability most brokers haven’t considered
• FMCSA compliance penalties for bond lapses can shut down your authority within days

The BMC-84 Surety Bond: Why $75,000 Isn’t Enough

The Federal Motor Carrier Safety Administration requires every licensed freight broker to maintain either a $75,000 BMC-84 surety bond or a BMC-85 trust fund agreement. This is the minimum. And for a brokerage handling even moderate volume, it’s laughably inadequate.

Here’s why that number deceives people. The bond protects shippers and carriers who file claims against your brokerage — not your brokerage itself. When claims exceed $75,000, and they will for any operation moving significant freight, the surety company comes after you personally for repayment.

• Average cargo claims in the Houston logistics corridor range from $15,000 to $350,000 depending on commodity type
• Multiple simultaneous claims can exhaust your bond in a single bad week, leaving subsequent claimants with no recourse
• Surety companies evaluate your personal credit, business financials, and claims history when setting bond premiums — typically $1,500 to $12,000 annually
• Bond cancellation triggers automatic FMCSA authority revocation within 30 days, which means your business goes dark
• A Houston-based brokerage client of ours discovered three pending claims totaling $180,000 after a carrier went bankrupt mid-transit — their bond covered less than half

Contingent Cargo Insurance: The Coverage Most Brokers Skip

Freight brokers don’t technically carry the cargo. But when a carrier’s insurance fails — and it does, more often than you’d think — the broker is the one standing in front of an angry shipper. Contingent cargo insurance fills the gap between what the carrier’s policy covers and what actually needs to be paid.

We’ve seen Houston brokerages get hammered because they relied on carrier certificates of insurance that turned out to be expired, fraudulently issued, or excluded the exact commodity being shipped. Contingent cargo isn’t a luxury — it’s the difference between surviving a major claim and closing your doors.

• Coverage typically ranges from $100,000 to $1,000,000 per occurrence, with premiums running $3,000 to $15,000 annually depending on freight volume and commodity types
• Policies can be structured with “primary” or “contingent” triggers — primary pays regardless, contingent kicks in only when the carrier’s policy fails
• Exclusions matter enormously: refrigerated goods, hazmat, high-value electronics, and alcohol often require endorsements or separate policies
• Double-brokering exposure — where loads get re-brokered without authorization — creates coverage gaps that even contingent cargo policies may not address
• Our licensed brokers negotiate contingent cargo terms that align with your shipper contracts, ensuring your coverage matches your contractual obligations

General Liability for Freight Brokerages

Standard commercial general liability covers the basics — someone slips at your office, your marketing materials defame a competitor, a visitor gets hurt on your premises. But freight brokerages face exposures that standard GL policies explicitly exclude.

The confusion we see most often? Brokers assuming their GL covers cargo-related claims. It doesn’t. GL and cargo coverage are completely separate animals, and mixing them up can leave you exposed to the exact claims most likely to hit your operation.

• Premises liability covers your physical office locations — critical if you operate warehouse space or have drivers reporting to your facility
• Products-completed operations coverage applies when your brokerage services cause downstream damage to a shipper’s business operations
• Personal and advertising injury protects against claims arising from your marketing, dispatch communications, or competitive solicitation
• GL premiums for mid-market freight brokerages typically run $5,000 to $25,000 annually depending on revenue, headcount, and physical operations
• Houston brokerages operating near port facilities or industrial zones face higher premises liability exposure due to environmental and traffic risks

Errors & Omissions: When Your Professional Judgment Gets Challenged

E&O insurance for freight brokers covers claims arising from mistakes in your professional services — misquoted rates, incorrect carrier assignments, failed delivery timelines, or improper documentation. One Houston brokerage we work with faced a $340,000 claim after a carrier they selected failed to maintain temperature requirements on a pharmaceutical shipment.

For brokerages managing complex logistics chains, E&O is arguably the most important coverage after your bond. Every rate confirmation, every carrier dispatch, every BOL you touch creates potential liability.

• E&O premiums for freight brokerages range from $3,000 to $20,000 annually based on revenue, claims history, and coverage limits
• Policy triggers include carrier selection negligence, documentation errors, customs brokerage mistakes, and rate disputes
• Many E&O policies exclude intentional acts and known compliance violations — maintaining rigorous carrier vetting processes can strengthen your coverage position
• Defense costs alone can exceed $50,000 even when claims are ultimately dismissed — E&O covers these legal fees from dollar one
• Our advisors structure E&O coverage that integrates with your existing errors and omissions program and carrier agreements

Commercial Auto and Non-Owned Auto Liability

Even if your brokerage doesn’t own trucks, you likely have employees driving for business purposes — visiting shipper facilities, meeting carriers, attending industry events. Non-owned and hired auto liability fills the gap when personal auto policies exclude business use.

Houston’s sprawling metro area means your team is on the road constantly. A single at-fault accident by an employee running to a shipper meeting can trigger a claim your personal auto policy won’t cover and your GL policy explicitly excludes.

• Non-owned auto liability typically costs $1,200 to $5,000 annually and covers employees using personal vehicles for business
• Hired auto coverage extends to rental vehicles used for business travel — essential for brokerages with regional or national operations
• If your brokerage operates any company vehicles, full commercial auto coverage is mandatory
• Texas minimum auto liability limits ($30,000/$60,000/$25,000) are dangerously low for business exposures — we typically recommend $1M combined single limit minimum
• Umbrella policies can extend auto liability limits cost-effectively for brokerages needing $5M+ in total coverage

Cyber Liability: The Exposure Nobody Talks About

Freight brokerages run on data — shipper information, carrier payment details, load board credentials, TMS access. A breach doesn’t just expose you to regulatory penalties. It can destroy shipper relationships you’ve spent years building.

We’ve watched the freight industry become increasingly digital, and the cyber insurance landscape has shifted dramatically in response. Brokerages handling sensitive shipper data and carrier payment information are prime targets.

• Average cyber breach costs for mid-market logistics companies exceed $120,000 including forensics, notification, and business interruption
• Load board credential theft and TMS hijacking are increasingly common attack vectors specific to freight brokerages
• Payment fraud through spoofed carrier emails accounts for millions in annual losses across the brokerage industry
• Cyber premiums for freight brokerages run $2,500 to $15,000 annually depending on revenue, data volume, and security posture
• Regulatory exposure under Texas data breach notification laws adds compliance costs that cyber policies can offset

Workers Compensation and Employment Practices

Texas doesn’t require workers compensation insurance, which tempts many freight brokerages to skip it. That’s a mistake. Without workers comp, injured employees can sue your brokerage directly — and personal injury verdicts in Harris County are among the highest in the nation.

For brokerages with dispatch teams, administrative staff, and any field personnel, workers compensation coverage eliminates your largest employment-related liability exposure while meeting shipper contract requirements.

• Workers comp premiums for office-based freight brokerage staff typically run $0.30 to $1.50 per $100 of payroll
• Texas non-subscriber employers face unlimited tort liability — a single workplace injury can trigger a seven-figure lawsuit
• Many shipper contracts require proof of workers compensation coverage regardless of state requirements
• Employment practices liability (EPLI) covers discrimination, harassment, and wrongful termination claims — critical for brokerages with 50+ employees
• Our licensed advisors help Houston logistics companies structure employment coverage that satisfies both regulatory and contractual requirements

Building a Complete Freight Brokerage Insurance Program

The freight brokerages that survive and scale are the ones that treat insurance as infrastructure, not overhead. A comprehensive program for a mid-market brokerage typically includes six to eight coverage lines working together to eliminate gaps.

We build freight brokerage insurance programs that account for Houston’s unique logistics environment — port proximity, petrochemical commodity exposure, hurricane season business interruption, and the complex carrier relationships that define this market.

• Total annual premiums for a well-structured mid-market freight brokerage program ($20M-$100M revenue) typically range from $50,000 to $250,000
• Bundling coverages with compatible carriers (Hartford, Travelers, Nationwide) often reduces total program cost by 15-25%
• Annual program reviews should coincide with FMCSA bond renewals to ensure all coverage dates align
• Shipper and carrier contract reviews should drive coverage decisions — your insurance should match your contractual obligations, not the other way around
• Our team at Hotaling works with carriers who understand freight brokerage operations and can underwrite your specific risk profile rather than applying generic logistics rates