Louisiana 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 Louisiana 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 Louisiana contractor license bond is not always required, but when it is, the purpose is to indemnify the licensing authority against responsibility for financial harm caused by a licensed contractor’s failure to comply with the laws and regulations governing contractors in that jurisdiction. The injured party can file a claim against the bond and be compensated for a monetary loss resulting from a violation.

 

Who Needs One?

Although most contractors working in Louisiana will need to be licensed by the Louisiana State Licensing Board for Contractors, there is no bonding requirement at the state level. However, it’s common for contractors to need a local license as well, and many local licensing authorities do require the purchase of a contractor license bond (also called a contractor license and permit bond). The required bond amount typically is between $5,000 and $10,000, but it can be higher.

Every contractor must find out what licensing and bonding requirements exist in the jurisdictions where they will be working.

How Does a Contractor License Bond Work?

Every Louisiana contractor license bond is a legally binding agreement among three parties:

  • The local authority requiring the surety bond is the “obligee.”
  • The contractor required to furnish the obligee with the bond is the “principal.”
  • The bond’s guarantor is the “surety.”

The principal’s violation of the terms of the surety bond agreement, such as failing to meet local building codes, can trigger a claim against the bond by the injured party. If the surety finds the claim to be valid, the principal is legally obligated to pay it.

It’s often difficult for the principal to pull together enough cash to pay a valid claim immediately. That’s where the surety’s role as a guarantor comes in. As the bond’s guarantor, the surety has agreed to lend the principal the funds to pay a valid claim if that becomes necessary. The surety will pay the claimant directly, drawing on a line of credit established for the principal at the time the bond was purchased. The principal must repay that debt to the surety, or the surety will take legal action to recover the funds.

How Much Does It Cost?

The annual premium for a Louisiana contractor license bond is the product of multiplying the required bond amount by the premium rate established by the surety through underwriting. The premium rate will reflect the risk the surety assumes in agreeing to pay claims on the principal’s behalf. The underwriters largely base their risk assessment on the principal’s credit score. There is an inverse relationship between credit score and risk level. A high credit score is a sign of low risk, and a low credit score suggests a higher risk level. Low-risk results in a low premium rate and higher risk in a higher rate.

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 Louisiana 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?

A Louisiana contractor license bond is not always required, but when it is, the purpose is to indemnify the licensing authority against responsibility for financial harm caused by a licensed contractor’s failure to comply with the laws and regulations governing contractors in that jurisdiction. The injured party can file a claim against the bond and be compensated for a monetary loss resulting from a violation.

Although most contractors working in Louisiana will need to be licensed by the Louisiana State Licensing Board for Contractors, there is no bonding requirement at the state level. However, it’s common for contractors to need a local license as well, and many local licensing authorities do require the purchase of a contractor license bond (also called a contractor license and permit bond). The required bond amount typically is between $5,000 and $10,000, but it can be higher.

Every contractor must find out what licensing and bonding requirements exist in the jurisdictions where they will be working.

Every Louisiana contractor license bond is a legally binding agreement among three parties:

  • The local authority requiring the surety bond is the “obligee.”
  • The contractor required to furnish the obligee with the bond is the “principal.”
  • The bond’s guarantor is the “surety.”

The principal’s violation of the terms of the surety bond agreement, such as failing to meet local building codes, can trigger a claim against the bond by the injured party. If the surety finds the claim to be valid, the principal is legally obligated to pay it.

It’s often difficult for the principal to pull together enough cash to pay a valid claim immediately. That’s where the surety’s role as a guarantor comes in. As the bond’s guarantor, the surety has agreed to lend the principal the funds to pay a valid claim if that becomes necessary. The surety will pay the claimant directly, drawing on a line of credit established for the principal at the time the bond was purchased. The principal must repay that debt to the surety, or the surety will take legal action to recover the funds.

The annual premium for a Louisiana contractor license bond is the product of multiplying the required bond amount by the premium rate established by the surety through underwriting. The premium rate will reflect the risk the surety assumes in agreeing to pay claims on the principal’s behalf. The underwriters largely base their risk assessment on the principal’s credit score. There is an inverse relationship between credit score and risk level. A high credit score is a sign of low risk, and a low credit score suggests a higher risk level. Low-risk results in a low premium rate and higher risk in a higher rate.

A well-qualified principal is likely to pay a premium rate between 1% and 3%.

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