Arkansas Contractor License Bonds

At Surety Bonds Agent, we offer a full range of surety bonds nationwide through an extended carrier network. Continue below to learn more about Arkansas contractor license bonds. If you have additional questions or want to explore bonding solutions for your business, speak with one of our knowledgeable surety bond experts.

 

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What Is a Contractor License Bond?

An Arkansas contractor license bond provides financial protection for the Arkansas Contractors License Board, which issues licenses at the state level, and for any local licensing bodies. These are surety bonds that require licensed contractors to comply with all applicable state laws and local rules governing the construction industry in Arkansas.

Who Needs One?

The Arkansas Contractors State License Board issues licenses for contractors with commercial contracts of $50,000 or more. Arkansas defines all contractors working on anything other than single-family homes to be commercial contractors.

There are separate licenses for residential builders and remodelers, and home improvement contractors. And some contractors may be subject to both state and local license and permit bonding requirements.

The required amount for an Arkansas commercial contractor license is $10,000. The required amount of all other bonds varies by license type and jurisdiction.

How Does a Contractor License Bond Work?

There are three parties to an Arkansas contractor license bond, which is legally binding on all three.

The Arkansas Contractors License Board or the local license authority requiring the bond is known as the “obligee.” The obligee establishes the required bond amount, also known as the bond’s penal sum.

The contractor purchasing the bond is called the “principal.” The principal is legally obligated to pay all valid claims against the bond.

The bond’s guarantor is the “surety.” The surety sets the premium rate determining how much the bond will cost. As the bond’s guarantor, the surety agrees to extend sufficient credit to the principal to cover valid claims if necessary. However, the surety is indemnified against any legal responsibility for the claim.

The surety will investigate every claim and decide whether it is valid and needs to be paid. If the surety determines that the principal did, in fact, commit a violation and must compensate the injured party, the surety typically will pay the claim initially. But the principal must repay the resulting debt to the surety within a certain amount of time. Failure to do so can result in the surety taking legal action to recover the funds from the principal.

How Much Does It Cost?

To determine the annual premium cost for an Arkansas contractor license bond, multiply the bond’s penal sum by the premium rate the surety assigns to the principal through underwriting. The underwriting process assesses the risk of the surety not being repaid for claims paid on the principal’s behalf.

The risk of non-repayment is measured using the principal’s personal credit score. A high credit score means the risk to the surety is low, so the premium rate will be low as well, often only 1% or a little less. A lower credit score is a red flag for higher risk, so the premium rate will be higher.

At Surety Bonds Agent, we offer a full range of surety bonds nationwide through an extended carrier network. Continue below to learn more about Arkansas contractor license bonds. If you have additional questions or want to explore bonding solutions for your business, speak with one of our knowledgeable surety bond experts.

CONTACT US FOR A

FREE CONSTRUCTION BOND QUOTE

What Is a Contractor License Bond?

An Arkansas contractor license bond provides financial protection for the Arkansas Contractors License Board, which issues licenses at the state level, and for any local licensing bodies. These are surety bonds that require licensed contractors to comply with all applicable state laws and local rules governing the construction industry in Arkansas.

 

The Arkansas Contractors State License Board issues licenses for contractors with commercial contracts of $50,000 or more. Arkansas defines all contractors working on anything other than single-family homes to be commercial contractors.

There are separate licenses for residential builders and remodelers, and home improvement contractors. And some contractors may be subject to both state and local license and permit bonding requirements.

The required amount for an Arkansas commercial contractor license is $10,000. The required amount of all other bonds varies by license type and jurisdiction.

There are three parties to an Arkansas contractor license bond, which is legally binding on all three.

The Arkansas Contractors License Board or the local license authority requiring the bond is known as the “obligee.” The obligee establishes the required bond amount, also known as the bond’s penal sum.

The contractor purchasing the bond is called the “principal.” The principal is legally obligated to pay all valid claims against the bond.

The bond’s guarantor is the “surety.” The surety sets the premium rate determining how much the bond will cost. As the bond’s guarantor, the surety agrees to extend sufficient credit to the principal to cover valid claims if necessary. However, the surety is indemnified against any legal responsibility for the claim.

The surety will investigate every claim and decides whether it is valid and needs to be paid. If the surety determines that the principal did, in fact, commit a violation and must compensate the injured party, the surety typically will pay the claim initially. But the principal must repay the resulting debt to the surety within a certain amount of time. Failure to do so can result in the surety taking legal action to recover the funds from the principal.

To determine the annual premium cost for an Arkansas contractor license bond, multiply the bond’s penal sum by the premium rate the surety assigns to the principal through underwriting. The underwriting process assesses the risk of the surety not being repaid for claims paid on the principal’s behalf.

The risk of non-repayment is measured using the principal’s personal credit score. A high credit score means the risk to the surety is low, so the premium rate will be low as well, often only 1% or a little less. A lower credit score is a red flag for higher risk, so the premium rate will be higher.

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