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Contractors License Bond
As a new or prospective contractor, you may not be familiar with what a contractors license bond is. License bonds are issued for the protection of contracting agents, or clients. In the event that a contractor fails to deliver on the obligations of the project, the bond issuer will compensate the client by a predetermined amount.
The Nevada State Contractors Board (NSCB) requires that all contractors licensed in the state post a bond for every contract they undertake. This is for the wellbeing of contracting agents located in Nevada. It also protects contractors by limiting their liability in the event of a project failure.
How does it work?
The NSCB determines the amount of each contractors license bond at the time of approval for each new contractor license. The Board’s website states that this amount is determined by “the type of license requested, monetary limit granted, past, present or future financial responsibility, experience, and character of the applicant.”
Once the application for a license has been approved, the Board will send the applicant a notice regarding the amount required for the license bond. Coverage of the license bond may be satisfied in one of two ways:
- Posting a surety bond for the required amount.
- Posting a cash deposit
What is a surety bond?
A surety bond is similar to an insurance policy. Surety companies in Nevada offer bonds of up to $5,000 of coverage for $100. Above this amount, every additional $1,000 of coverage costs an additional $20.
For example: The NSCB determines that your license bond is $5,000. To satisfy this requirement, you can pay $100 to purchase a $5,000 instant issue surety bond from a surety company, and use that to satisfy the license bond requirement.
Posting cash deposits
For those who are unable to obtain a surety bond, there is also the option to satisfy the license bond requirement by posting $5,000 in cash. Since the statute of limitations for filing claims is 2 years, the Board is required to hold that cash for 2 years after the expiration date of the license before it is returned to the contractor.
Additional bonding for pools and spas
Contractors who work on swimming pools and hot tubs require additional bonds due to the additional complexity and liabilities associated with their work. Nevada requires contractors working on pools to obtain a Consumer Protection Bond of at least $10,000 in addition to the license bond requirements.
To ensure quality craftsmanship, some projects require a performance bond of at least half the contract’s value, for the protection of the contracting agent. A payment bond of half the contract’s value may also be required for the protection of subcontractors providing labor and materials for the contractor.
We’ll help you through the bonding process
Contractors Exam, Inc. will help you satisfy the contractors license bond requirements once you’ve passed your licensing exam. We will guide you through the process to establish your own self-proprietorship after completing the bonding process. Join Nevada’s booming construction industry today.
Contact us via our website, or call our Las Vegas office at (702) 949-7277.