Georgia 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 Georgia 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?

A Georgia contractor license bond is a way to help ensure a contractor’s compliance with applicable laws and regulations governing Georgia’s construction industry. The bond provides a way to compensate those who incur monetary damages because of a contractor’s noncompliance. It also indemnifies the licensing authority against any legal responsibility for such damages.

 

Who Needs One?

The Georgia State Licensing Board for Residential and General Contractors issues licenses for residential and general contractors domiciled in the state, which entails the purchase of a $25,000 contractor license bond. The Georgia Department of Revenue regulates contractors based in a state other than Georgia, which carries different bonding requirements.

Also, a number of Georgia towns and counties have their own licensing and bonding requirements. You’ll have to check with any jurisdiction you plan to work in to determine their particular requirements. Any locally required contractor license bond is in addition to a state-mandated license bond.

How Does a Contractor License Bond Work?

A Georgia contractor license bond is a legally binding contract among three parties; with different but related roles and responsibilities:

  • The “obligee” is the Georgia State Licensing Board for Residential and General Contractors or a local licensing authority. The obligee establishes the bond’s required amount (its “penal sum,” sets the bond’s terms and conditions, and is protected financially by the bond.
  • The “principal” is the contractor purchasing the bond and is legally obligated to pay all valid claims against it.
  • The “surety” is the bond’s guarantor and agrees to extend credit to the principal, if necessary, for the payment of valid claims. The surety determines the premium rate the principal will pay to obtain the bond and investigates all claims to determine their legitimacy and whether they should be paid.

If the principal violates the terms of a Georgia contractor license bond, resulting in a financial loss to the obligee, the obligee can file a claim against the bond. If the surety finds the claim to be valid, the usual practice is for the surety to pay the claim initially, then be reimbursed by the principal within a certain period of time. Failure to repay that debt can result in the surety taking legal action to recover the funds from the principal.

How Much Does It Cost?

The annual premium for a Georgia contractor license bond is calculated by multiplying the punitive sum established by the obligee by the premium rate determined by underwriting. The underwriting assessment leans heavily on the principal’s personal credit score as a measure of the risk of the principal failing to repay the surety for claims paid by the surety on the principal’s behalf.

There is an inverse relationship between credit score and risk level, with a high credit score indicating low risk and a low credit score serving as a red flag for higher risk. Low risk earns the principal a low premium rate, while higher risk warrants a higher premium rate.  A well-qualified principal typically pays a premium rate in the vicinity of one to three percent.

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

 

The Georgia State Licensing Board for Residential and General Contractors issues licenses for residential and general contractors domiciled in the state, which entails the purchase of a $25,000 contractor license bond. The Georgia Department of Revenue regulates contractors based in a state other than Georgia, which carries different bonding requirements.

Also, a number of Georgia towns and counties have their own licensing and bonding requirements. You’ll have to check with any jurisdiction you plan to work in to determine their particular requirements. Any locally required contractor license bond is in addition to a state-mandated license bond.

A Georgia contractor license bond is a legally binding contract among three parties; with different but related roles and responsibilities:

  • The “obligee” is the Georgia State Licensing Board for Residential and General Contractors or a local licensing authority. The obligee establishes the bond’s required amount (its “penal sum,” sets the bond’s terms and conditions, and is protected financially by the bond.
  • The “principal” is the contractor purchasing the bond and is legally obligated to pay all valid claims against it.
  • The “surety” is the bond’s guarantor and agrees to extend credit to the principal, if necessary, for the payment of valid claims. The surety determines the premium rate the principal will pay to obtain the bond and investigates all claims to determine their legitimacy and whether they should be paid.

If the principal violates the terms of a Georgia contractor license bond, resulting in a financial loss to the obligee, the obligee can file a claim against the bond. If the surety finds the claim to be valid, the usual practice is for the surety to pay the claim initially, then be reimbursed by the principal within a certain period of time. Failure to repay that debt can result in the surety taking legal action to recover the funds from the principal.

The annual premium for a Georgia contractor license bond is calculated by multiplying the punitive sum established by the obligee by the premium rate determined by underwriting. The underwriting assessment leans heavily on the principal’s personal credit score as a measure of the risk of the principal failing to repay the surety for claims paid by the surety on the principal’s behalf.

There is an inverse relationship between credit score and risk level, with a high credit score indicating low risk and a low credit score serving as a red flag for higher risk. Low risk earns the principal a low premium rate, while higher risk warrants a higher premium rate.  A well-qualified principal typically pays a premium rate in the vicinity of one to three percent.

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