Contractor License Bonds

Why Are Contractor License Bonds Required?

Contractor bonds are a requirement to have a state, county, or city contractor license issued. They are even required to obtain certain permits depending on county or city requirements.

A contractor licensing board requires this bond because they are certifying a contractor and their business as a licensed contracting authority.

A contractor and ownership team who has:

• Fulfilled the required years of in the field experience
• Passed the rigorous examinations
• Structured their business appropriately
• Purchased the appropriate insurance

A state, county, and/or city wants contractors the public can trust. Plus they want the public protected in cases where a contractor or their employees purposefully harm their customers.

What Does a Contractor License Bond Cover?

As we've mentioned, one of the responsibilities of a contractor license board is to protect the public from contractors who purposefully harm or defraud their customers to increase profits.

Examples of purposeful fraud can include:

• Not finishing work on a project
• Failing to follow building codes and performing inferior work
• Stealing from customer down payments
• Replacing contracted materials with cheaper alternatives
• Not paying subcontractors

The amount of financial protection afforded to customers is the bond amount. Again, every state, country, and city has their own requirement for contractor bond amounts.

If there's ever a dispute with a customer, it's best to work with the customer to resolve all issues before they can escalate to a claim on the contractor bond.

How Much Does a Contractor Bond Cost?

The cost of a contractor bond is based on the bond amount set by the state, county, or city.

The bond amount is typically set by a contractor licensing board.

There are two pricing scenarios that determine the cost (or price) of a contractor license bond.

1. Fixed Priced Contractor Bonds

Some state, country, and city contractor bonds can be offered at low fixed prices with zero credit checks.

We know which sureties offer the best prices for each state’s contractor license bond. These bonds rarely need a signed agreement which further speeds up the process.

2. Contractor Bonds Requiring a Quote

The majority of license bonds require a quoted rate by a surety to determine the price. The surety is the insurance company that underwrites contractor bonds. The rate multiplied by the bond amount is the price you pay.

Each surety determines this rate based on:

1. Primarily, personal credit
2. Past business and contractor industry experience
3. Any prior claims on bonds if you've ever had previous bonds

Having helped thousands of contractors purchase their license bond, typical rates are:

Find your rate today by starting the quote process. Click on your state, above or below, and you can start the quote process in 90 seconds. You can also start the process by talking to a bond specialist at 1-800-608-9950.

How Long Does It Take To Get a Contractor Bond?

Scenario 1: Within Hours

For the contractor bonds you can instantly purchase, you can get your bond within a few hours to within one business day.

Scenario 2: 1 to 2 Days

For the license bonds that require a quoted rate from the surety, the process typically takes 1 to 2 business days to have your bond in hand. In many cases we can file the bond with the correct licensing board for you, making the process easier and faster.

What Happens After You Purchase Your Contractor Bond?

After you purchase your bond, we’ll send it to you based on the requirements of the agency or contractor board (the obligee).

Depending on your state and the surety writing the bond, you may need to sign an agreement (usually online) before we can send the bond to you.

We’re able to process contractor bonds...

• With a few hours for some
• Most within one business day
• Some states may require an additional day

E-Filing Contractor License Bonds

In many cases, we’re able to e-file your bond for you. This is limited to the licensing agencies that allow for e-filing such as the California Contractors License Board.

Emailing Contractor Bonds

In most cases we’re able to prepare your bond electronically and email you the bond. The board or agency requiring your bond may require you to print and sign the paper copy, but email saves you time.

Physically Mailing Contractor Bonds

Some state's licensing boards require the bond to be physically signed and submitted with the application. In these cases, we have to mail the bond to you. Unfortunately, we don’t have any control over this, but we do have expedited shipping options if you’re in a hurry.

This is one reason why you should avoid pushing off purchasing your contractor bond to the last minute. The first step is to get exact pricing for your needs, so click on your state and start the quote process.

You can also call and speak with a bond specialist for personalized assistance at 1-800-608-9950.

How Long Do Contractor Bonds Last?

In most cases contractor license bonds are required to remain active for the lifetime of your contracting business.

Most contractor bonds are continuous. This means as long as you pay the renewal premium the bond you have will remain active. You won't have to have a new bond issued and submit it to your licensing board. (If we find you lower pricing, we'll help you purchase and issue this new bond.)

The only factor you must pay attention to is the renewal date.

But working with Surety Bonds Direct makes this easy. As your renewal date approaches, your bond specialist will contact you 30 to 45 days in advance to make sure your renewal premium is paid.

What Is a Bid, Payment, and Performance Bond Compared To a License Bond?

Contractors require many different types of bonds over their career and project portfolio. Besides contractor license bonds, the most common types of bonds a contractor will have to purchase are:

• Bid bonds
• Performance bonds
• Payment bonds

These types of bonds are almost always for government work whether it’s a large project with the federal government (bonds required by the Miller Act), or a sidewalk repair for a city (right of way bond).

At the state and municipal level, you’ll sometimes hear the “mini Millar Act” to refer to that government agency’s bonding requirements.

What Bid, Payment, and Performance Bonds at a High Level?

Once a contractor is licensed and becomes a bonded contractor, they can start bidding on projects. Depending on the project, this may require a bid bond.

A bid bond protects the project owner from receiving unrealistic bids that would prevent the project from being completed.

Once a contractor wins a project, a performance and payment bond may have to be obtained.

A performance bond protects the project owner from a contractor who does not follow through on the agreed upon contract.

A payment bond protects the project owner and subcontractors from a contractor who does not properly pay for subcontractors, supplies, and material for the project.

But first you must obtain your contractor license and license bond.

Find the license bond you need. You can instantly begin the free, price quote process. You can always call a bond specialist for personal assistance at 1-800-608-9950.