Ohio 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 Ohio 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 the instances in which an Ohio contractor license bond is required, the aim is to protect the licensing authority, project owners, and the public against the financial harm caused by a licensed contractor’s unlawful or unethical actions. When a loss occurs due to a licensed contractor’s regulatory noncompliance, carelessness, or malfeasance, the injured party can file a claim against the contractor’s license bond and be compensated for damages.

 

Who Needs One?

In Ohio, only specialty (HVAC, plumbing, electrical) contractors are licensed at the state level, and there is no bonding requirement. General contractors and home improvement contractors working in some jurisdictions may need to obtain a local license, and in some cases, that may include purchasing a contractor license surety bond.

How Does a Contractor License Bond Work?

There are three parties to an Ohio contractor license bond: the local licensing authority (the “obligee”), the contractor (the “principal”), and the bond’s guarantor (the “surety”). 

Upon receipt of a claim, the surety determines whether it is valid. The legal obligation for paying valid claims belongs entirely to the principal. 

However, having guaranteed the bond, the surety will pay it initially on behalf of the principal and establishes the terms for the principal to repay the resulting debt. Failing to repay the surety may result in the surety suing the principal to recover the funds.

How Much Does It Cost?

The annual premium for an Ohio contractor license bond is calculated by multiplying the required bond amount (set by the obligee) and the premium rate (assigned by the surety). The required bond amount, or “penal sum,” is the maximum that will be paid out on a claim. The premium rate reflects the risk of the surety not being repaid for claims paid on the principal’s behalf. That risk is measured in terms of the principal’s personal credit score.

There is an inverse relationship between credit score and risk level. A high credit score suggests a low risk to the surety, while a low credit score means the risk to the surety is high. Low risk earns the principal a low credit score, while high risk warrants a high premium rate.

The premium rate for a well-qualified principal usually is 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 Ohio 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 the instances in which an Ohio contractor license bond is required, the aim is to protect the licensing authority, project owners, and the public against the financial harm caused by a licensed contractor’s unlawful or unethical actions. When a loss occurs due to a licensed contractor’s regulatory noncompliance, carelessness, or malfeasance, the injured party can file a claim against the contractor’s license bond and be compensated for damages.

 

In Ohio, only specialty (HVAC, plumbing, electrical) contractors are licensed at the state level, and there is no bonding requirement. General contractors and home improvement contractors working in some jurisdictions may need to obtain a local license, and in some cases, that may include purchasing a contractor license surety bond.

There are three parties to an Ohio contractor license bond: the local licensing authority (the “obligee”), the contractor (the “principal”), and the bond’s guarantor (the “surety”). 

Upon receipt of a claim, the surety determines whether it is valid. The legal obligation for paying valid claims belongs entirely to the principal. 

However, having guaranteed the bond, the surety will pay it initially on behalf of the principal and establishes the terms for the principal to repay the resulting debt. Failing to repay the surety may result in the surety suing the principal to recover the funds.

The annual premium for an Ohio contractor license bond is calculated by multiplying the required bond amount (set by the obligee) and the premium rate (assigned by the surety). The required bond amount, or “penal sum,” is the maximum that will be paid out on a claim. The premium rate reflects the risk of the surety not being repaid for claims paid on the principal’s behalf. That risk is measured in terms of the principal’s personal credit score.

There is an inverse relationship between credit score and risk level. A high credit score suggests a low risk to the surety, while a low credit score means the risk to the surety is high. Low risk earns the principal a low credit score, while high risk warrants a high premium rate.

The premium rate for a well-qualified principal usually is in the range of 1% to 3%. 

 

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