If you’re a contractor in California – or looking to get your license – you know you need to have a License Bond to get your California contractor’s license. In the CSLB’s own words:
“A Contractor’s Bond must be in place before CSLB can issue an active license, reactivate an inactive license, or renew an active license. (Business and Professions Code Section 7071.6).”
As a general contractor or a specialized contractor in California, it’s critically important to understand the ins and outs of the California Contractors License Bond.
This article will take an in-depth look at California contractor license bonds. We’ll cover everything you need to know about how to get your bond and start working as a contractor today.
What’s the Purpose of the California Contractors License Bond?
A Safety Net for Consumers
The California Contractors License Bond exists primarily to protect consumers from any financial loss resulting from a contractor’s failure to meet their contractual obligations.
Basically, a Contractor’s License Bond exists to make sure that consumers are protected by sketchy or unscrupulous contractors who perform poor work or don’t perform the work agreed upon in the contract. In the case of a project that doesn’t meet expectations, the client who hired the contractor will at least be protected financially by this bond.
At the end of the day, the licensing bond serves as a safety net, ensuring that contractors will adhere to the rules and regulations set forth by the Contractors State License Board (CSLB) – which is critical to maintaining trust between contractors and clients.
Who Needs to Obtain a California Contractors License Bond?
The Licensing Requirement
If you’re looking to perform construction work in California that exceeds $500 in labor and materials, you’ll need to secure a California Contractors License Bond.
In other words, if you’re looking to do any sort of construction work beyond simple handyman jobs, you’ll need a valid CSLB contractor’s license. And in order to get a contractor’s license, you’ll need to provide a surety bond.
This requirement applies to any sort of construction work. If you’re a plumber, you need a licensing bond. If you’re a solar installer, you need a licensing bond. If you’re a general contractor, heck, if you’re an engineer with a Class A license, you need a licensing bond.
How Much Coverage Do I Need?
Changes To The Required Bond Amount
Heads up! As of January 1, 2023, bond amount requirements have increased. In the past, contractors were required to provide contractor license bonds in the amount of $15,000. That has changed!
As of 2023, you now need to provide a bond in the amount of $25,000 to the CSLB to get your contractor’s license.
How Much Does the California Contractors License Bond Cost?
Crunching the Numbers
The bond amount required by the CSLB is currently set at $25,000. However, contractors don’t pay the full bond amount upfront.
Instead, they pay a premium, which is typically a percentage of the bond amount. The premium rate varies depending on the contractor’s credit score and other factors, such as:
- Financial standing
- Industry experience
- Claims history
- Disciplinary record
Contractors with good credit can expect to pay a premium of 1-3% of the bond amount, while those with less-than-stellar credit might pay a premium of 5-15%.
In general, you can get a contractor’s bond in California from roughly $100-$500.
How Do I Obtain a California Contractors License Bond?
Securing the Bond
To obtain a California Contractors License Bond, follow these steps:
- Contact a surety bond company or insurance agency authorized to issue contractor license bonds in California.
- Complete the bond application, providing your business information, license number, and other required details.
- Undergo a credit check and other underwriting procedures to determine your premium rate.
- Pay the required premium and receive your bond.
Once you’ve secured the bond, submit a copy of it to the CSLB to complete your licensing process.
Where Can I Find A CSLB-approved Contractor Bond Provider?
Get Your Bond From A CSLB-verified Contractor
Finding a reputable company to supply your contractor’s license bond isn’t difficult – there are dozens of insurance and bonding companies in California that offer low-cost bond packages for contractors.
However, all bond providers MUST be approved by the CSLB, so make sure you are buying a contractor’s bond from a CSLB-approved provider.
As of February 2023, here is the full list of approved surety companies.
- Allegheny Casualty Company
- American Alternative Insurance Corporation
- American Casualty Company of Reading Pennsylvania
- American Contractors Indemnity Company
- American States Insurance Company
- Arch Insurance Company
- Argonaut Insurance Company
- Aspen American Insurance Company
- Atlantic Specialty Insurance
- Berkley Insurance Company
- Berkley Regional Insurance Company
- Berkshire Hathaway Specialty Insurance Company
- Bond Safeguard Insurance Company
- Business Alliance Insurance Company
- Capitol Indemnity Corporation
- Cincinnati Insurance Company (The)
- Colonial Surety Company (only the contractor bond endorsement)
- Continental Casualty Company
- Continental Insurance Company (The)
- Contractors Bonding and Insurance Company
- Employers Mutual Casualty Company
- Endurance Assurance Corporation
- Everest Reinsurance Company
- Federal Insurance Company
- Fidelity and Deposit Company of Maryland
- Financial Pacific Insurance Company
- First National Insurance Company of America
- Granite Re, Inc dba Granite Surety Insurance Company
- Gray Casualty & Surety Company (The)
- Gray Insurance Company (The)
- Great American Insurance Company
- Great Midwest Insurance Company
- Hanover Insurance Company (The)
- Harco National Insurance Company
- Hartford Fire Insurance Company
- Hartford Insurance Company of the Midwest
- Hudson Insurance Company
- Jet Insurance Company
- Lexon Insurance Company
- Liberty Mutual Insurance Company
- Markel Insurance Company
- Merchants Bonding Company (Mutual)
- National Fire Insurance Company of Hartford
- Nationwide Mutual Insurance Company
- Navigators Insurance Company
- Old Republic General Insurance Corporation
- Old Republic Surety Company
- Pacific Indemnity Company
- Philadelphia Indemnity Insurance Company
- Platte River Insurance Company
- RLI Insurance Company
- Safeco Insurance Company of America
- State Farm Fire and Casualty Company
- St Paul Fire and Marine Insurance Company
- SureTec Insurance Company
- Swiss Re Corporate Solutions America
- Swiss Re Corporate Solutions Premier
- The Guarantee Company of North America USA
- The North River Insurance Company
- The Ohio Casualty Insurance Company
- Travelers Casualty and Surety Company
- Travelers Casualty and Surety Company of America
- Trisura Insurance Company
- United Fire & Casualty Company
- United States Fire Insurance Company
- United Surety Insurance Company
- Universal Surety of America
- U S Specialty Insurance Company
- Vigilant Insurance Company
- Wesco Insurance Company
- Westchester Fire Insurance Company
- Western National Mutual Insurance Company
- Western Surety Company
- XL Specialty Insurance Company
- Zurich American Insurance Company
You can find more information on the CSLB’s bond page here.
Can I Get a California Contractors License Bond with Bad Credit?
Don’t Give Up Hope
While it’s true that having bad credit can make obtaining a California Contractors License Bond more challenging, it’s not impossible. Many surety bond companies offer bonds for applicants with less-than-perfect credit. However, expect to pay a higher premium rate if your credit history is less than stellar.
How Long Does the California Contractors License Bond Last?
The California Contractors License Bond is valid for a period of one or two years, depending on the bond’s terms.
Contractors are required to maintain an active bond at all times during their licensing period. Failure to do so can result in penalties or even the suspension of your contractor’s license.
What Happens if There’s a Claim Against My Bond?
The Claim Process
If a consumer files a claim against your California Contractors License Bond, the surety company will investigatethe claim to determine its validity. If the claim is deemed valid, the surety company will pay the claimant up to the bond amount. However, as the contractor, you are ultimately responsible for repaying the surety company for any claim payouts, as well as any legal fees associated with the claim.
To avoid claims, it’s essential to adhere to the rules and regulations set forth by the CSLB, honor your contracts, and provide high-quality workmanship.
What’s the Difference Between a Contractors License Bond and Insurance?
Bonds vs. Insurance
While both bonds and insurance are designed to protect parties from financial loss, they serve different purposes and offer distinct forms of protection. Generally speaking, bonds are to protect the consumer, whilst insurance is there to protect you and your company from liability.
A California Contractors License Bond protects consumers by ensuring that contractors adhere to CSLB rules and regulations. If a contractor fails to meet their obligations, the bond will cover the consumer’s financial loss.
Contractors’ insurance, on the other hand, protects the contractor and their business from financial loss due to property damage, bodily injury, or other liabilities that may arise during the course of their work.
As a contractor, it’s important to have both a bond and adequate insurance coverage to protect yourself and your clients.
The California Contractors License Bond is an essential requirement for contractors operating in the Golden State. By understanding the ins and outs of this bond, you’ll be better equipped to navigate the bonding process and maintain compliance with the CSLB requirements.
Remember to keep in mind the California Contractors License Bond’s purpose, cost, validity, and the process of obtaining and maintaining one. Additionally, be aware of how to handle claims and the difference between a bond and insurance. With this knowledge, you’ll be on the path to a successful and thriving contracting business in sunny California!