Contractors License Bond

License & Permit Bonds & Contractors License Bonds Overview

Before being legally licensed in certain states, contractors must get a license and permit bond. These commercial bonds are intended to protect consumers by providing a financial incentive for bonded businesses to follow local, state, and federal regulations.

What is a Contractor License Bond

A contractor license bond is a type of license and permit bond required for contractors to obtain a license. A bond binds three parties: the principal, the obligee, and the surety.

• The principal, or the contractor, is required to purchase the bond.
• The obligee is the consumer or the state agency that is protected by the bond. The obligee usually requires the bond.
• The surety is the company that provides the bond to the principal and sets the bond’s terms.
• If the principal does not follow the terms of the surety, the obligee can claim on the bond to obtain compensation for any damages incurred. If the claim is found to be valid, the bond will be used to cover costs, and the contractor will be required to pay for a new bond to obtain a new license.

There is a common misunderstanding that a contractor license bond is intended to protect a contractor. However, purchasing a surety bond is different from buying traditional insurance. A contractor license bond is intended to protect those working with the contractor from breaking laws and regulations, which are included in the terms of the bond. If the contractor follows laws and regulations, there should be no claims and no payout from the bond.

Considerations for Contractors License Bonds

If you are required to obtain a contractor license bond to get your contractor license, keep in mind that several factors can affect the price of your bond and your ability to get one.

• Your Credit History – With good credit, applicants typically pay one to two percent of the bond amount. With bad credit, you may need a bond professional to help you find the best rate.
• Your Claim History – The more violations you have, the more expensive your bond will be.

How to Get Started

The bond professionals at Fusco & Orsini are here to help you obtain a bond for your business at the best price. Based on your credit and claim history, we can find top options for you. Click here to get started on your bond today!