Contractor License Bond FAQ

1. What is a surety bond?
2. What does it cost to get a surety bond?
3. What does my credit have to do with anything?
4. Why do I need a CA contractor license bond?
5. Is the bond quote and payment process immediate?
6. Is this site secure? How will you use my information?

1. What is a surety bond?

A surety bond is a contract among at least three parties:

• Principal – the primary party who will be performing a contractual obligation (the contractor)
• Obligee – the entity requiring the bond (generally a city/town or State). For a Contractor License Bond the obligee is the California State License Bond.
• Surety – company that ensures the principal's obligations will be performed

The surety bond is an agreement by the surety to uphold the contractual promises (obligations) made by the principal if the principal fails to uphold his promises to the obligee. The surety bond is a form of consumer protection, serving as a line of credit to cover any damages incurred by breach of contract between the principal and the obligee.

2. What does it cost?

Applying for a surety bond is just like applying for credit, therefore the amount you pay (aka the premium) for the bond is based on your personal credit. In general, bonds for good credit cost 1-3% of the total bond amount. If you credit is less than perfect the premium can start as low as 7.5% of the bond amount. Since there can be a large difference in premium charged from surety to surety, we work with multiple surety companies to ensure you are getting the most affordable option.

3. What does my credit have to do with anything?

If something were to go wrong, ie there is a valid claim filed on your bond, the surety is financially responsible for paying out the full dollar amount of the claim. The surety is financially backing you as a contractor therefore the surety is interested in learning your ability to pay them back on potential claims. Your credit score and history gives the surety a measureable diagnostic as to your ability to come up with potentially large sums of money.

4. Why do I need a CA contractor license bond?

In order for a contractor's license to be active, the California State License Board (CSLB http://www.cslb.ca.gov/) strongly recommends the contractor to have insurance (which protects from accidents, injury, etc) and requires the contractor to get a surety bond (which will protect your clients).

Scenario 1:

A licensed contractor is working at a client's house and the contractor falls off a ladder and land on the client's vase, breaking it. The contractor's insurance company could potentially step in and pay for the damages, because it is an unforeseen accident that was not due to negligence on his/her part.

Scenario 2:

After an argument with a client, a contractor decides not to finish a job, leaving the kitchen sink torn out, pipes exposed and water shut off. That contractor is in direct violation of California Contractor License Laws. The surety bond the contractor signed states they will follow all California Contractor License Laws and if they don't the surety will pay out on all damages incurred by any violations of these laws – up to a maximum dollar amount as stated in the bond. The surety is guaranteeing the contractor's performance of the contract between the contractor (principle) and the CSLB (obligee), who regulates contractors on behalf of the people of California. Since the contractor did not fulfill their agreement with the CSLB as stated in the bond, a claim will be filed on their bond for the damages. After some investigation to ensure the claim is valid, the surety then pays out on the claim and the contractor in turn has to pay back the surety.

To read more regarding California Contractor License Laws, visit CSLB's official laws and regulations page: http://www.cslb.ca.gov/GeneralInformation/Library/Laws/

5. Is the bond quote and payment process immediate?

Our team of surety bond specialists shops around to find the best rates for your personal situation. You should get a quote emailed to you within 48 hours. We will also follow up with a phone call to ensure you get your quote as soon as possible. If you have credit issues the process will take longer – we have many excellent solutions for those with bad credit, and our team will work hard to provide you the best bond rates.

6. Is this site secure? How will you use my information?

Our online application system is completely secure, and we will never sell your information to third parties.