What is a Tennessee Contractor License Bond?
Tennessee does not have a mandatory state-wide contractor license bond like many other states. However depending on the county, local municipality, or the project requirements, you may be required to purchase a surety bond.
This surety bond, called a contractor bond, is a type of insurance contract required for a license, permit, or when a contractor doesn't meet specific requirements. At a high level a contractor license bond is a a financial guarantee that you'll follow all Tennessee building codes and regulations, plus follow through on your contracting obligations to your customers.
By purchasing a contractor license bond, you're making this promise to the Tennessee Department of Commerce & Insurance, the local agency, and to your customers.
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Who Is Required To Purchase a Tennessee Contractor Contractor Bond?
Tennessee Home Improvement Contractors
The most common type of contractor license bond in Tennessee is called the Tennessee Home Improvement license.
These are the following counties that require this license:
- Bradley
- Davidson
- Haywood
- Hamilton
- Knox
- Marion
- Robertson
- Rutherford
- Shelby
The license is required for all residential contracting work between $3,000 and $24,999. It does not cover work for HVAC, plumbing, or electrical. These require their own license with no bonding requirement.
Nashville and Davidson County Contractors
Contractors performing work in Nashville and Davidson county, must obtain a permit and surety bond.
There are different requirements for the type of contractor like a blasting contractor, house moving, and excavation contractors.
Fire Protection Sprinkler System Contractors
Fire protection sprinkler system contractors are required to obtain their own statewide license from the Tennessee Department of Commerce and Insurance. A requirement for this license is purchasing a surety bond.
General Contractors
Any construction job over $25,000 requires the contractor or business entity to get a general contractor license.
Once licensed, the Department of Commerce and Insurance will determine the size of the projects a contractor can perform based on their monetary limit.
The monetary limit is the lesser of...
- 10 times working capital
- 10 times net worth
An unlimited monetary limit requires working capital and the net worth to be over $300,000.
If a contractor wants to supplement their monetary limit, they can purchase a contractor bond.
Licensed Business Subsidiaries
If a licensed business entity has a subsidiary that is getting its own contractor's license, the parent company is required to purchase a contractor bond for the subsidiary.
Finally, based on other county or local municipalities, there may be additional bonding requirements. You will learn about these requirements when you go to pull permits for the specific job.
The Tennessee Contractor License Bond Amount
Here are the bond amounts for all of the contractor bonds listed above:
| Contractor License | Bond Amount |
|---|---|
| Tennessee Home Improvement License | $10,000 |
| Nashville and Davidson County Permit | $10,000 or $40,000 |
| Fire Protection Sprinkler System License | $10,000 |
| General Contractors | $500,000 or $1,000,000 |
| License Business Subsidiaries | $500,000 or $1,000,000 |
| Local | Bonds vary up to $25,000 |
The bond amount is set by the Department of Commerce & Insurance, the Nashville and Davidson County Department of Codes and Building Safety, and the individual regulatory local agencies.
These amounts are not the price to purchase the bond.
The amount is the maximum coverage available to customers and subcontractors of a contractor in the event they fall victim to purposeful misconduct or fraud by the contractor.
How Much Does a Tennessee Contractor License Bond Cost?
At a high level, the price of a contractor license bond is based on a rate quoted by a surety.
A surety is an insurance company that underwrites the surety bond. And like any insurance company, the rates they charge are based on their own internal assessment, typically taking into consideration these factors:
- Personal credit of the owner or owners
- Contracting experience and industry experience
- Any prior bond claims if you've been licensed in the past
- The overall risk of losses in contracting industry in Tennessee
The rate multiplied by the bond amount is the price to purchase the bond.
Even though each surety uses these similar factors, the rates they quote will vary.
And because rates vary, the final prices can vary too. Surety bond agencies like Surety Bonds Direct help customers save hundreds of dollars purchasing a contractor bond.
We use our network of A rated sureties to price shop for you and find you the lowest possible price.
Home Improvement Contractor Bond Prices
Surety Bonds Direct has secured low fixed prices with zero credit check for the Home Improvement contractor surety bond.
The prices are as follows:
| Bond Amount | Bond Term | Price | Buy Today |
|---|---|---|---|
| $10,000 | 1 Year | $100.00 | Buy Now |
| $10,000 | 2 Years | $175.00 | Buy Now |
| $10,000 | 3 Years | $250.00 | Buy Now |
Nashville and Davidson Contractor Permit Bond
| Bond Amount | Bond Term | Price | Buy Today |
|---|---|---|---|
| $10,000 | 1 Year | Custom Price | Request Pricing |
| $40,000 | 1 Year | Custom Price | Request Pricing |
Fire Protection Sprinkler System Contractor Bond
| Bond Amount | Bond Term | Price | Buy Today |
|---|---|---|---|
| $10,000 | 1 Year | $100.00 | Purchase Today |
Other County or City Contractor Bond Requirements
| Bond Amount | Bond Term | Price | Buy Today |
|---|---|---|---|
| Up to $25,000 | 1 Year | 1.0% to 1.8% of Bond Amount | Get Instant Price |
| Up to $25,000 | 1 Year | 1.0% to 1.8% of Bond Amount | Get Instant Price |
General Contractor License Bond
This bond requires a custom quote from a surety.
Again, the rate multiplied by the bond amount is the price you pay. Let's use the minimum bond amount of $500,000 for monetary limits of less than $3 million.
The rates in the table are from good to average.
| Bond Amount | Bond Term | Price | Buy Today |
|---|---|---|---|
| $500,000 | 1 Year | Custom Price | Request Pricing |
| $1,000,000 | 1 Year | Custom Price | Request Pricing |
What is a Bond Term?
You probably noticed the Home Improvement Contractor bond and the "other" county and local bonds offer a one, two, or three year bond term.
The bond term is the length of time the bond remains active before it must be renewed.
The following contractor bonds have bond terms of one year.
- Nashville and Davidson county permit bond
- Fire Protection Sprinkler System bond
- General contractor surety bond
Why is a Tennessee Contractor Bond Required?
The licensing agencies require individuals and businesses to obtain a contractor license in order to perform contracting services in the state, the county, and/or city limits.
This licensing process ensures each contractors has:
- Accumulated a minimum level of experience
- Obtained the necessary level of education
- Submitted the proper business records
- Purchased the proper insurance policies
A contractor license bond is often a common requirement for obtaining a license or a permit for a construction project.
When a bond is required, it's often because the number of consumer complaints reached a level for the state and/or local governments to take action to protect their public. A surety bond is one level of financial protection offered to the the customers of contractors.
What Does a Tennessee Contractor Bond Protect Against?
The contractor bond is a type of insurance for the protection of the contractor's customers and hired subcontractors.
Unfortunately, there will always be a small number of licensed contractors who purposefully decide to harm their customers to increase profits.
These fraudulent acts of misconduct include:
- Breaking the terms of a construction project
- Amending the contract without proper notice
- Taking deposits and never starting or completing a project
- Requiring overly large project deposits
- Replacing agreed upon materials with cheaper alternatives to increase profits
- Failing to pay subcontractors for completed work
- Failing to follow building codes and purposefully performing poor quality work
If a contractor is found guilty of any of these actions, a claim can be made against the contractor license bond for financial repayment.
Remember the amount of coverage only extends to the specific bond amount.
What Happens After You Purchase Your Bond?
After you purchase your bond, Surety Bonds Direct's issuance team will prepare your bond with the correct signatures, seals, and the required power of attorney so your bond is guaranteed to be accepted.
Nearly every Tennessee agency requiring a contractor bond allows Surety Bonds Direct to email the bond to you. If you run into a requirement where the original bond with raised seals is mandatory, we can mail you the bond.
This is a good reason to purchase your surety bond as soon as you can. You don't want the bond to be the reason for a delayed license application or delayed project start date.
Get this done!
Renewing Your Contractor Bond
Renewing your bond is easy. As your specific bond term approaches, your Surety Bonds Direct 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.
These Contractor License Bonds are 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 the bond to the agency requiring the bond.
If we find you lower pricing during bond renewal, we'll secure you the lower priced bond. In this case you will have to have the bond filed again with the correct agency.
Contractor Bonds And Getting Your Tennessee Business License/Registration
If you're applying for a contractor license in Tennessee for the first time, it's good to check with the local rules where your project is located.
We have a detailed article outlining the process for getting your Tennessee Home Improvement license.
Here's a resource to help you get the Nashville and Davidson county permit.
We also have a detailed article outlining the requirements of the General Contractor bond.
If you have any questions, please contact a bond specialist today at 1-800-608-9950. Surety Bonds Direct has helped thousands of Tennessee contractors get bonded.
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