California Contractor License Bond

At Surety Bonds Agent, we offer a full range of surety bonds nationwide through an extended carrier network. Continue below to learn more about California 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?

In California, contractor license bonds, also referred to simply as contractor bonds are a requirement for obtaining a license to operate as a contractor within the state. They provide protection for the state against liability for any financial harm that state-licensed contractors cause their clients. A contractor license bond is a contractor’s pledge to obey the State Contractor’s License Law.

 

Who Needs One?

Any contractor applying to obtain or renew their license with the Contractors State License Board (CSLB) must purchase a $25,000 contractor bond. The bond must be renewed before its expiration date to avoid license revocation.

How Does a Contractor License Bond Work?

The surety bond agreement for a California contractor license bond is a legally binding contract among three parties:

  • CSLB (the “obligee” requiring the bond),
  • The contractor (the “principal”), and
  • The bond’s guarantor (known as the “surety”).

If the principal violates the State Contractors License Law and causes financial harm to the state or to a client, the injured party can file a claim against the bond to recover monetary damages up to the $25,000 limit.

In approving a contractor license bond, the surety agrees to lend the principal the money to pay a valid claim if necessary. However, the legal obligation to pay valid claims rests entirely with the principal. It’s up to the surety to determine whether or not a claim is valid and must be paid.

Typically, the surety will pay a valid claim directly to the claimant, tapping into a line of credit established for the principal at the time the bond was purchased. The principal then has a certain length of time in which to repay the debt to the surety. Not repaying the surety can result in the surety taking legal action against the principal to recover the funds.

How Much Does It Cost?

The annual premium for a California contractor license bond depends on the level of risk the surety will be assuming in agreeing to lend the principal money for the payment of claims. The greatest risk is not being repaid by the principal.

Every application for a contractor license bond goes through an underwriting process to qualify the principal and assess the risk to the surety. The principal’s personal credit score is a key factor in that assessment.

A high credit score is perceived as an indicator of low risk to the surety, which leads to a low premium rate. Conversely, a low credit score signals higher risk and warrants a higher premium rate. In most cases, a well-qualified principal with good credit will pay a premium rate in the range of 1% to 3%.

At Surety Bonds Agent, we offer a full range of surety bonds nationwide through an extended carrier network. Continue below to learn more about California 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?

In California, contractor license bonds, also referred to simply as contractor bonds are a requirement for obtaining a license to operate as a contractor within the state. They provide protection for the state against liability for any financial harm that state-licensed contractors cause their clients. A contractor license bond is a contractor’s pledge to obey the State Contractor’s License Law.

 

Any contractor applying to obtain or renew their license with the Contractors State License Board (CSLB) must purchase a $25,000 contractor bond. The bond must be renewed before its expiration date to avoid license revocation.

The surety bond agreement for a California contractor license bond is a legally binding contract among three parties:

  • CSLB (the “obligee” requiring the bond),
  • The contractor (the “principal”), and
  • The bond’s guarantor (known as the “surety”).

If the principal violates the State Contractors License Law and causes financial harm to the state or to a client, the injured party can file a claim against the bond to recover monetary damages up to the $25,000 limit.

In approving a contractor license bond, the surety agrees to lend the principal the money to pay a valid claim if necessary. However, the legal obligation to pay valid claims rests entirely with the principal. It’s up to the surety to determine whether or not a claim is valid and must be paid.

Typically, the surety will pay a valid claim directly to the claimant, tapping into a line of credit established for the principal at the time the bond was purchased. The principal then has a certain length of time in which to repay the debt to the surety. Not repaying the surety can result in the surety taking legal action against the principal to recover the funds.

The annual premium for a California contractor license bond depends on the level of risk the surety will be assuming in agreeing to lend the principal money for the payment of claims. The greatest risk is not being repaid by the principal.

Every application for a contractor license bond goes through an underwriting process to qualify the principal and assess the risk to the surety. The principal’s personal credit score is a key factor in that assessment.

A high credit score is perceived as an indicator of low risk to the surety, which leads to a low premium rate. Conversely, a low credit score signals higher risk and warrants a higher premium rate. In most cases, a well-qualified principal with good credit will pay a premium rate in the range of 1% to 3%.

 

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