Florida 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 Florida 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?

When a Florida contractor license bond is required, the purpose is to indemnify local authorities against financial liability resulting from a contractor’s failure to comply with state law and local regulations, including building codes.

 

Who Needs One?

While Florida licenses certain contractors at the state level, state licensing does not require a contractor’s license bond. Until April 13th, 2022, the Florida Department of Business and Professional regulation did require a construction license bond for contractors whose FICO credit score did not meet the threshold for financial responsibility.

That is no longer the case. Now, the only contractors who may be required to furnish a contractor license bond in the state of Florida are those seeking registration in one of the municipalities requiring both a local license and a contractor license bond.

It’s up to every contractor to determine whether the area in which they want to work requires both registration and bonding.

How Does a Contractor License Bond Work?

There are three parties to a Florida contractor license bond:

  • The local authority requiring the contractor to register and provide a contractor license surety bond is known as the bond’s “obligee.”
  • The contractor required to furnish the local authority with the bond is called the “principal.”
  • The party guaranteeing the bond is referred to as the “surety.”

The bond is legally binding on all three parties.

Any violation of the terms of the surety bond agreement, such as failing to meet local building codes, can result in a claim against the bond. The bond provides a way to compensate the injured party, which could be the obligee or a project owner, for monetary damages. It’s up to the surety to determine whether a particular claim is valid. The principal is legally obligated to pay all valid claims.

However, the surety will pay the claimant directly, as an extension of credit to the principal. The principal must subsequently repay the surety within a certain period of time. Failing to repay the surety for claims paid on the principal’s behalf can result in the surety taking legal action against the principal.

How Much Does It Cost?

The cost of a Florida contractor license bond is determined by multiplying two factors—the required bond amount (also known as the bond’s penal sum) and the premium rate assigned to the principal by the surety through an underwriting process.

The main underwriting concern is the risk that the surety won’t be repaid for claims paid on behalf of the principal. The primary measure of that risk is the principal’s personal credit score.

A high credit score suggests that the risk to the surety is low, which is rewarded with a low premium rate. On the other hand, a low credit score is a red flag for risk, so the premium rate will be significantly higher. A well-qualified principal is likely to pay a premium rate between 1% and 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 Florida 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?

When a Florida contractor license bond is required, the purpose is to indemnify local authorities against financial liability resulting from a contractor’s failure to comply with state law and local regulations, including building codes.

 

While Florida licenses certain contractors at the state level, state licensing does not require a contractor’s license bond. Until April 13th, 2022, the Florida Department of Business and Professional regulation did require a construction license bond for contractors whose FICO credit score did not meet the threshold for financial responsibility.

That is no longer the case. Now, the only contractors who may be required to furnish a contractor license bond in the state of Florida are those seeking registration in one of the municipalities requiring both a local license and a contractor license bond.

It’s up to every contractor to determine whether the area in which they want to work requires both registration and bonding.

There are three parties to a Florida contractor license bond:

  • The local authority requiring the contractor to register and provide a contractor license surety bond is known as the bond’s “obligee.”
  • The contractor required to furnish the local authority with the bond is called the “principal.”
  • The party guaranteeing the bond is referred to as the “surety.”

The bond is legally binding on all three parties.

Any violation of the terms of the surety bond agreement, such as failing to meet local building codes, can result in a claim against the bond. The bond provides a way to compensate the injured party, which could be the obligee or a project owner, for monetary damages. It’s up to the surety to determine whether a particular claim is valid. The principal is legally obligated to pay all valid claims.

However, the surety will pay the claimant directly, as an extension of credit to the principal. The principal must subsequently repay the surety within a certain period of time. Failing to repay the surety for claims paid on the principal’s behalf can result in the surety taking legal action against the principal.

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 cost of a Florida contractor license bond is determined by multiplying two factors—the required bond amount (also known as the bond’s penal sum) and the premium rate assigned to the principal by the surety through an underwriting process.

The main underwriting concern is the risk that the surety won’t be repaid for claims paid on behalf of the principal. The primary measure of that risk is the principal’s personal credit score.

A high credit score suggests that the risk to the surety is low, which is rewarded with a low premium rate. On the other hand, a low credit score is a red flag for risk, so the premium rate will be significantly higher. A well-qualified principal is likely to pay a premium rate between 1% and 3%.

 

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