What is an Arizona Contractor License Bond?
Arizona requires all licensed contractors to purchase a surety bond before a license can be issued. Plus Arizona has additional bonding requirements in certain circumstances.
A surety bond, or contractor license bond, is a type of insurance required by the Arizona Registrar of Contractors (AZROC). A contractor license bond is a a financial guarantee that, along with following Arizona building codes, regulations, and laws, you'll provide your customers with ethical business practices and complete your projects according the contract.
When you purchase a contractor license bond, you're making this promise to the Arizona Registrar of Contractors and to your customers.
Get Your Arizona Contractor Bond
$4,250
Bonds over $4,250
Bonds over $6,750
Bonds up to $50,000
1-Year Bond Starts at $100.00
0.5% of the Bond Amount
over $50,000
Bonds over $50,000
Bonds up to $25,000
1-Year Bond Starts at $100.00
1.0% of the Bond Amount
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Who Is Required To Purchase an Arizona Contractor Bond?
Arizona has 4 primary license classifications:
- Residential General Contractors
- Residential Specialty Contractors
- Commercial General Contractors (includes General Engineering Contractors)
- Commercial Specialty Contractors
In Arizona you can obtain Dual General Contractor licenses as well. This is the combination of a residential license with a commercial license.
Again, every licensed contractor is required to purchase a license bond before the application will be approved.
What is a Taxpayer Surety Bond?
Part of the licensing process involves obtaining a Transaction Privilege Tax License. This ensures you will pay the required 5.6% sales tax on all projects that are deemed taxable.
If an in-state contractor is guilty of failing to pay the correct amount of sales tax, AZROC will require the contractor to purchase a taxpayer surety bond.
Every out-of-state contractor is required to purchase a taxpayer surety bond and hold it for two years.
The taxpayer bond acts as a guarantee the contractor will pay the appropriate sales tax on all taxable projects.
Recovery Fund Surety Bond
AZROC has a recovery fund designed to provide further financial assistance to consumers who have been harmed by a licensed contractor. This fund provides a further $30,000 of available reimbursement to customers.
If a contractor chooses not to participate in the Recovery Fund, they must purchase a surety bond in the amount of $200,000.
The Arizona Contractor License Bond Amounts
A surety bond amount is the coverage available to customers and the state of Arizona in the event a claim made against the contractor.
These amounts are set by the Arizona Registrar of Licensure and are based on the expected gross volume or revenue for the license being issued.
| License Type | Contemplated Gross Volume (Per License) | Bond Amount |
|---|---|---|
| Residential General Contractors | Less than $750,000 | $9,000 |
| $750,000 or more | $15,000 | |
| Residential Specialty Contractors | Less than $375,000 | $4,250 |
| $375,000 or more | $7,500 | |
| Commercial General Contractors (Includes General Engineering Contractors) | $150,000 or less | $5,000 |
| In excess of $150,000 but not more than $500,000 | $15,000 | |
| In excess of $500,000 but not more than one million | $25,000 | |
| In excess of one million but not more than five million | $50,000 | |
| In excess of five million but not more than ten million | $75,000 | |
| In excess of ten million | $100,000 | |
| Commercial Specialty Contractors | $150,000 or less | $2,500 |
| In excess of $150,000 but not more than $500,000 | $7,000 | |
| In excess of $500,000 but not more than one million | $17,500 | |
| In excess of one million but not more than five million | $25,000 | |
| In excess of five million but not more than ten million | $37,500 | |
| In excess of ten million | $50,000 |
A contractor can get licensed with a dual license (residential and general). In this case, the bond amount is the total of the residential amount and the general amount.
| License | Contemplated Gross Volume (Per License) | Bond Amount |
|---|---|---|
| Residential General Contractor | Less than $750,000 | $9,000 |
| Commercial General Contractor | Less than $500,000 but not more than one million | $15,000 |
| Bond Total: | $24,000 |
Remember, this bond amount is not the price. This is the limit of available coverage in the event a successful claim is made against your business.
How Much Does an Arizona Contractor Bond Cost?
The price of Arizona contractor bonds vary based on the type of bond required and is determined by a rate quoted by a surety.
A surety is an insurance company that underwrites the surety bond. They will perform an independent assessment and determine a rate using factors such as:
- Personal credit of the owner or owners
- Contracting experience and industry experience
- Any prior bond claims if owners have been licensed in the past
- Plus the overall contracting industry in Arizona
This rate multiplied by the bond amount is the price you pay.
As a surety agency, we've seen thousands of quoted rates for Arizona contractors and these rates can vary. Finding the lowest rate can potentially save you hundreds of dollars.
Here's what you can expect for pricing.
Fixed Priced Bonds With Zero Credit Check
Because Surety Bonds Direct works with multiple A-rated sureties, we're able to secure fixed prices with no credit check required for the following contractor bonds.
Residential Contractor Bond
| Bond Amount | Bond Term | Price | Buy Today |
|---|---|---|---|
| $4,250 | 1 Year | $123.00 | |
| $4,250 | 2 Year | $216.00 | |
| $4,250 | 3 Year | $308.00 |
Dual Commercial & Residential Contractor Bond
| Bond Amount | Bond Term | Price | Buy Today |
|---|---|---|---|
| $6,750 | 1 Year | $136.00 | |
| $6,750 | 2 Year | $238.00 | |
| $6,750 | 3 Year | $339.00 |
This means you're able to purchase your bond today and within 1 to 2 business days (max) have your bond issued so you can complete your application process.
Bonds That Require a Custom Quote
The remaining bonds require a custom rate quoted by a surety.
- Residential contractor bonds over $4,250
- Dual contractor bonds over $6,750
- Commercial contractor bond over $50,000
- Taxpayer contractor bond
Again, because we work with multiple A-rated sureties, we will price shop for you to find the lowest possible rate and therefore the lowest possible price.
Let's look at a pricing example. We'll use the $9,000 Residential General Contractor bond. The following rates are from really good to average.
| Bond Amount | Premium Rate | Total Cost |
|---|---|---|
| $9,000 | 1% | $90 |
| $9,000 | 2% | $180 |
| $9,000 | 3% | $270 |
| $9,000 | 4% | $360 |
| $9,000 | 5% | $450 |
Having a bond specialist price shop for you costs nothing and once you receive pricing, there is no obligation to purchase.
We work hard to earn your business and make the contractor bond process simple.
Why is an Arizona Contractor Bond Required?
The Arizona Registrar of Contractors requires all individuals and businesses to obtain a contractor license in order to perform contracting services in the state.
This license process ensures each contractors has:
- A minimum level of experience
- Passed the Arizona Statutes and Rules Training course and exam
- Passed all required trade exams
- Registered the proper business forms
- Ensure the proper insurance policies are purchased and in place
And the contractor surety bond is one of those required insurance policies you must purchase before AZROC will issue an active license.
What Does an Arizona Contractor Bond Protect Against?
The contractor license bond is a type of insurance for the protection of the contractor's customers and hired subcontractors.
The taxpayer surety bond is protection for the Arizona Department of Revenue to make sure they are paid the required sales taxes from all taxable projects.
It's unfortunate, but each year there will be a handful of contractors who will purposefully break contract rules to make more money or choose to not pay sales taxes.
Examples of misconduct and fraud by a contractor can include:
- Breaking the terms of a construction project
- Never finishing projects
- Taking deposits or down payments and never starting or completing a project
- Replacing agreed upon materials with cheaper alternatives to increase profits
- Fail to pay subcontractors for completed work
- Altering contracts or overcharging for changes
If a contractor is deemed guilty of any of these actions, a claim can be made against their contractor license bond (or taxpayer bond) for financial repayment.
Remember the amount of coverage only extends to the bond amount.
What Happens After You Purchase Your Bond?
After you purchase your bond, Surety Bonds Direct's issuing department will prepare your bond with the correct signatures, seals, and the required power of attorney so the Arizona Registrar of Contractors is guaranteed to accept your bond, or your money back.
Arizona allows us to email the bond to you. This makes it easy for you to submit the bond directly to the Board.
Don't put getting your bond off as the last step. You don't want your application to be delayed.
Get this done!
Renewing Your Contractor Bond
Contractor license bonds with an amount of $4,250 or less (the fixed priced bonds), can be purchased with a:
- 1 year bond term
- 2 year bond term
- 3 year bond term
The remaining Arizona contractor bonds expire one year from the active (effective) date of your bond.
No matter which bond you require, your bond specialist will reach out to you 30 to 45 days in advance of your renewal date to make paying the renewal premium easy.
Once you pay the renewal premium, your bond remains active.
This Contractor License Bond is Continuous
A continuous bond means the original bond remains active as long as you pay the renewal premium.
Most of the time, you never have to worry about having a new bond issued or submitting a new bond back to the Board.
If we find you lower pricing during bond renewal, we'll secure you the lower priced bond. In this case you will have to submit the bond to the Board so they know you're still actively bonded.
Contractor Bonds And Getting Your Arizona Business License/Registration
If this is the first time you're applying for an Arizona contractor license, the process can seem complex. We have written a breakdown of the Arizona contractor licensing process with links to the relevant resources.
Plus, check out this post about the contractor license classifications. There are a lot in Arizona.
At a high level the steps are:
- Get your application fees and other payments together
- Take the required Statutes and Rules course and exam
- Pass the trade exams for your license
- Purchase the required surety bond
- Pay into the Recovery Fund
- Submit your application on time for Board review
Additional Arizona Contractor Bond Resources & Links
Arizona Registrar of Contractors
Arizona Revised Statutes Section 32-1152 Bonds
Contractor's license bonds are set in the following amounts based upon the gross volume of work contemplated by the licensee within the State of Arizona for the ensuing fiscal year.
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