Category Archives: bond

Contractor’s License Surety Bonds: AZ, NV, CA

Understanding Contractor’s License Surety Bonds

Contractor License Bonds are a type of Surety Bond, and are typically required from a variety of businesses, such as Contractors, as a pre-licensing requirement.  California, Arizona and Nevada Contractors are all required to post Contractor’s License Surety Bonds or a cash deposit. This type of bond is a guarantee that the contractor will satisfactorily complete all work for the owner according to the contract, and that all construction costs be paid. This is a three party agreement between the Surety Company (Guarantor), the Contractor (Principal) and the Owner (Obligee, such as in this case, the Contractors Board).

Each State Contractor Licensing Board has their own specific bond form and amounts required. Nevada, California and Arizona Contractor’s License Surety Bond requirements can be found using these links: Nevada: Nevada State Contractors Board; California: Contractors State License Board; and Arizona: Arizona Registrar of Contractors.

Contractors Exam Center is ready to help you acquire your bond. You can start your application here.

Is a Contractor’s License Surety Bond an Insurance Policy?

Contractor License Surety Bonds are not insurance. They do not protect the Contractor. The Contractor, who defaults, will be responsible pay back any money spent to complete the project.  Bonds function as a credit guarantee to the owner.

How much do Contractor’s License Surety Bonds cost?

Most contractors purchase a Contractor’s License Surety Bond in lieu of putting up a large cash deposit for a long period of time. For example, if the Nevada State Contractors Board requires a $10,000.00 bond, they would require a cashier’s check for $10,000.00 and a biennial fee of $200.00. If a Contractor opted to purchase a bond instead, the Surety Company would charge a premium of the bond amount which usually paid annually.  You can see bond rates here.

An important factor in determining premium is credit score based, however, some are instant issue. As a premium example from above, a $10,000.00 Nevada Contractors License with good credit could cost an experienced contractor approximately $300.00 annually, and discounts are offered in multi years.  Most Nevada Contractor License Surety Bonds $2,000.00 and under are instant issue, as are most Arizona Contractor License Commercial Surety Bonds.

Other Types of Surety Bonds

After a Contractor is licensed, they may be asked for additional bonding for public works, or large construction projects. These are called Contract Bonds, which are different than a Contractor’s License Surety Bond and include bid, payment and performance bonds. These guarantee the Contractor fulfills his contractual agreement as promised and that subcontractors are paid.

Contractors Exam Center is a great source to discuss these needs with you after licensing, as well as Liability Insurance and Workers Compensation. We can be reached at Contact Us – Contractors Exam Center – Arizona and Nevada Contractor’s License.   Next month we will discuss Liability and Workers Compensation in more detail.