North Carolina 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 North Carolina 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 North Carolina contractor license bond is required, the purpose is to ensure that funds are available to compensate the state or consumers for financial losses resulting from a licensed contractor’s unlawful or unethical business conduct.

 

Who Needs One?

The North Carolina Licensing Board for General Contractors maintains specific financial responsibility requirements or different classes of contractor licenses. Contractors who meet those requirements do not have to purchase a surety bond. A contractor license bond is mandated only for contractors who fall short of the applicable financial responsibility requirement (i.e. the required amount of working capital) for their license class.

The required bond amounts are:

  • $350,000 for a limited license
  • $1,000,000 for an intermediate license
  • $2,000,000 for an unlimited license

How Does a Contractor License Bond Work?

In the lingo of surety bonds, the three parties to a surety bond agreement are known as the obligee, the principal, and the surety. In North Carolina:

  • The obligee is the state of North Carolina.
  • The principal is the contractor purchasing the bond.
  • The surety is the bond’s guarantor.

When the state or a consumer incurs a financial loss because of something the contractor did or failed to do, for example, using substandard materials or failing to complete a job, the injured party can file a claim against the principal’s contractor license bond. The surety will conduct an investigation and decide whether or not the claim is valid. The principal is legally obligated to pay all claims the surety finds to be valid.

But it’s rare for a principal to pay a claimant directly. The surety has agreed to extend credit to the principal for the payment of claims and will pay the claim on behalf of the principal, creating a debt that the principal must pay back. Not repaying the surety can result in the surety taking legal action against the principal to recover the debt.

How Much Does It Cost?

The annual premium for a North Carolina contractor bond is established by multiplying the required bond amount by the premium rate the surety assigns on a case-by-case basis. Each bond application goes through an underwriting process that assesses the risk the surety will be assuming. The main concern is the risk of the principal not repaying the surety for claims paid on the principal’s behalf. The underwriters lean heavily on the principal’s personal credit score in measuring that risk.

A high credit score is a good indication of a low-risk level, which earns the principal a low premium rate. The opposite is also true. A low credit score is a sign of higher risk, so the principal will be assigned a higher premium rate.

A well-qualified principal usually pays 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 North Carolina 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 North Carolina contractor license bond is required, the purpose is to ensure that funds are available to compensate the state or consumers for financial losses resulting from a licensed contractor’s unlawful or unethical business conduct.

 

The North Carolina Licensing Board for General Contractors maintains specific financial responsibility requirements or different classes of contractor licenses. Contractors who meet those requirements do not have to purchase a surety bond. A contractor license bond is mandated only for contractors who fall short of the applicable financial responsibility requirement (i.e. the required amount of working capital) for their license class.

The required bond amounts are:

  • $350,000 for a limited license
  • $1,000,000 for an intermediate license
  • $2,000,000 for an unlimited license

In the lingo of surety bonds, the three parties to a surety bond agreement are known as the obligee, the principal, and the surety. In North Carolina:

  • The obligee is the state of North Carolina.
  • The principal is the contractor purchasing the bond.
  • The surety is the bond’s guarantor.

When the state or a consumer incurs a financial loss because of something the contractor did or failed to do, for example, using substandard materials or failing to complete a job, the injured party can file a claim against the principal’s contractor license bond. The surety will conduct an investigation and decide whether or not the claim is valid. The principal is legally obligated to pay all claims the surety finds to be valid.

But it’s rare for a principal to pay a claimant directly. The surety has agreed to extend credit to the principal for the payment of claims and will pay the claim on behalf of the principal, creating a debt that the principal must pay back. Not repaying the surety can result in the surety taking legal action against the principal to recover the debt.

The annual premium for a North Carolina contractor bond is established by multiplying the required bond amount by the premium rate the surety assigns on a case-by-case basis. Each bond application goes through an underwriting process that assesses the risk the surety will be assuming. The main concern is the risk of the principal not repaying the surety for claims paid on the principal’s behalf. The underwriters lean heavily on the principal’s personal credit score in measuring that risk.

A high credit score is a good indication of a low-risk level, which earns the principal a low premium rate. The opposite is also true. A low credit score is a sign of higher risk, so the principal will be assigned a higher premium rate.

A well-qualified principal usually pays a premium rate between 1% and 3%.

 

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