Contractor License Bonds in California

In the states of California, Arizona, and Washington, it is required for all licensed contractors to maintain a contractor license bond in the amount of $12,500 with the California Contractors License Board (CSLB). A contractors license bond is a form of surety bond that many states across the US require licensed contractors to carry. The main purpose of this license is to protect consumers. Consumers can file a claim if a contractor commits financial misconduct, or if the contractor refuses to abide by state or local regulations and laws. Contractor license bonds in California do not guarantee performance or competence, but instead help compensate consumers when a contractor does violate licensing laws.

How Does a Contractor Bond Work?

It is imperative for contractors to understand how contractor license bonds in Washington, along with other states work and the purpose they serve. In short, a contractor’s license bond is an agreement between three parties:

The Principal: The contractor who has purchased the bond

The Obligee: The “consumer” or “project owner” who requires and is protected by the bond

The Surety: The company who financially backs the bond

Contractor license bonds in Arizona, just like in California and Washington, protect the obligee rather than the contractor. Since surety bonds are fully indemnified, contractors are responsible for paying any claims that have been filed against the bond. Say, for example, if a consumer were to make a claim against the bond, and the claim is deemed valid, the surety company would pay the claim initially, and then be reimbursed by the contractor. Not only does DJM Insurance Services offer license bonds, but we can also write bid and performance bonds in California for your company, too.

Obtaining a Contractor Bond

Contractor license bonds are not insurance, but a form of credit. They exist to protect the consumers, and with the license bonds being a form of credit, contractors have to apply and qualify for a bond just like other forms of credit. There is typically an application process involved in acquiring the bond, along with a credit check and some level of affirmation that the contractor has the financial stability to uphold the bond.

Wondering how much contractor bonds in California or Washington cost? The answer varies, as costs fluctuate between different surety companies. Rates are determined by the credit score of the contractor as well as the overall credit-worthiness. Contractors who do not have good credit, or do not have a strong credit history, will often receive a higher rate.

Apply For a Contractor’s Bond Today
Not only is having a contractors license bond an important business asset, but it is also required in the majority of states across the US. Obtaining a bond shows the contractor is trustworthy, responsible, and committed to following through on their work.

Understanding contractor license bonds in California, Arizona, and Washington can be difficult. With so many questions to be answered, having the team at DJM Insurance Services on your side can be of great benefit.

Since we specialize in the construction industry, we know which surety markets offer the best rates based on your unique credit situation. Call us today at (800) 763-0698 for your free, no-obligation Contractors License Bond quote.

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