Contractor License Bonds (Out-of-State Contractors)

Get Your Iowa Contractor Bond

Who Is Required To Purchase an Iowa Contractor Contractor Bond

Iowa Plumbing and Mechanical Contractors

The Plumbing and Mechanical Systems Board and Iowa Division of Labor requires plumbing and mechanical contractors to get licensed to perform work in the state. Part of the licensing process is purchasing a contractor bond.

Just to clarity, a plumbing and mechanical contractor performs the following work:

• Plumbing
• Mechanical
• HVAC
• Refrigeration
• Sheet metal
• Hydronic system

The amount of the bond is a minimum of $5,000.

We have never seen the amount go higher than $5,000. However, it is a possibility and most likely based on the size of the projects you'll be completing.

Iowa Out-of-State Contractors

Iowa Department of Inspections Appeals and Licensing requires all out-of-state contractors to purchase a contractor bond before starting any projects in the state.

The out-of-state contractor bond has an amount of $25,000.

In addition to ensuring project completion and ethical customer service, this out-of-state contractor bond ensures the contractor will pay all taxes and contributions under the unemployment compensation insurance system.

County or Municipal Bonding Requirements

Depending on where your project is located there may be additional bonding requirements in the form of a:

• License bond
• Permit or performance bond

A license bond is a "blanket bond" that covers all the work you'll perform in the given county or municipality.

A permit or performance bond is only active for the life of a given project.

You'll be notified of these additional bonding requirements when you apply to the specific county or municipality for the required permits to begin work on the project.

Examples of cities we have helped contractors satisfy the bond requirement are:

As you can see, on the local level, the bonding requirements can vary. But each bond serves and is required for a similar purpose.

Why is an Iowa Contractor Bond Required?

The state of Iowa and local cities require contractors to go through a licensing process to ensure they have:

• A minimum level of experience
• The necessary level of education
• The proper business records are submitted
• An appropriate license type for the projects they want to bid on

This license process's intent is to ensure only reputable contractors can serve the public and add value to their communities.

And requiring a surety bond is a primary way a licensing agency can hold contractors accountable to the promises they make when taking on a new customer.

Despite the licensing process and the contractor bond requirement, there are contractors who will harm their customers on purpose to make more money.

What Does an Iowa Contractor License Bond Protect Against?

All contractor surety bonds serve the similar purpose of holding contractors accountable to the promises they make to their customers.

And yet, there will always be licensed contractors who cut corners to increase profits or even steal money from their customers.

These fraudulent actions of misconduct include:

• Breaking the terms of a construction project
• Taking deposits or down payments and never starting or completing a project
• Replacing agreed upon materials with cheaper alternatives to increase profits
• Failing to pay subcontractors for completed work
• Neglecting building codes and purposefully performing poor quality work

In the case of out-of-state contractors, beyond the promise to customers, the bond ensures the contractor pays the appropriate taxes for doing business in Iowa. So a contractor bond can protect the licensing agency as well.

If a contractor is found guilty of any of these actions, a claim can be made against the contractor license bond or permit for financial repayment, but only up to the bond amount.

And as you know, the bond amounts vary.

How Much Does an Iowa Contractor Bond Cost?

At a high level the cost of a contractor bond is based on a rate quoted from a surety.

A surety is an insurance company that underwrites the surety bond. And similar to a "typical" insurance policy, the assessment to determine the cost is unique from surety to surety.

The major factors that determine the cost are:

• Personal credit of the owner or owners
• Contracting experience and industry experience
• Any prior bond claims if you or an owner has been licensed in the past

And this is why you should use a surety agency like Surety Bonds Direct to purchase your bond.

We price shop for you with our network of A rated sureties to find you the lowest possible price.

And because we're one of the most trusted surety agencies, we have secured low fixed prices for many of the Iowa contractor bonds. This means you get to:

• Skip having your credit pulled
• Speed up the bond purchase process

Here are the prices for the contractor bonds we sell the most.

Keep in mind the state and municipality update bond amounts and terms every few years. So these prices may vary slightly.

Iowa Out-of-State Contractor Bond

The $25,000 Iowa out-of-state contractor bond requires a custom quote from a surety according to the process covered above.

Remember, this means looking at the personal credit of all owners, their experience, and any prior bond claims, if applicable.

Here are explains rates and prices based on the $25,000 bond amount. These rates are from really good to about average.

While these are good estimates, you should request your quote now so you can get your pricing.

Remember, we will price shop for you and you're under no obligation to purchase once you get your pricing. Plus price quotes are good for 30 days, so there's no reason to not get this done now.

Other County, City, or Local Government License Bonds

For other local bonding requirements, you can instantly purchase your bond, for bond amounts up to $25,000.

Once you have the bond amount given to you by the county or city agency requiring the bond, the minimum price starts at $100.

The price is 1% to 1.8% of the bond amount.

Surety Bonds Directly allows you to enter your bond amount and instantly purchase your bond. After you purchase, the bond will be issued within 1 to 2 business days.

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, notarized seals, and the required power of attorney.

Most Iowa bonds can be emailed to you making the process faster. You would need to print a copy of the bond and sign it before you submit it to the appropriate authority.

If the agency requiring the bond wants the original bond, we can mail you the original bond. Make sure you account for shipping time.

Renewing Your Bond

Most Iowa contractor bonds expire 12 months from the effective date. The effective date is a date you choose when you want the bond to begin its active term.

As the expiration date approaches your Surety Bonds Direct bond specialist will reach out to you 30 to 45 days in advance to make paying the renewal premium easy.

Once you pay the renewal premium your bond is activated for the next term.

Continuous Bond

A continuous bond means the original bond remains active as long as you pay the renewal premium. You don't have to do anything extra.

Most Iowa contractor bonds are continuous making renewing the bond easy.

Permit and/or Performance Bonds

Permit and/or performance bonds only renew if the life of the project extends beyond 12 months.

If this is the case, your bond specialist will help you renew your bond to keep it active with little effort on your part.

Contractor Bonds And Getting Your Iowa Business License/Registration

If you're applying for your first Iowa contractor license the process is similar from the state bond to the local requirements.

At a high level the steps are:

1. Create a business registry or register a business name
2. Outline business management (if applicable)
3. Decide on license classification and specialty or registered agent
4. Purchase the required surety bond (if applicable)
5. Pay all the appropriate fees
6. Submit your completed application

Here are some good resources where you can find the individual steps:

• Iowa plumbing and mechanical contractor license
• Iowa Department of Inspections Appeals and Licensing
• City of Muscatine Licenses and Permits
• City of Davenport Contractor Licenses
• Sioux City Licensing and Permits
• City of Ottumwa Licensing and Permits