Wisconsin Contractor License Bond

In Wisconsin, contractors doing general contracting work must obtain a dwelling contractor license from the State of Wisconsin Department of Safety and Professional Services (WDSPS). Specialty contractors also must be licensed as dwelling contractors at the state level, as well as obtaining licenses in their own specialized trades. One of the prerequisites for licensing as a dwelling contractor is providing WDSPS with a $25,000 contractor license bond. (There may be local licensing and bonding requirements as well for some contractors.)

A Wisconsin contractor license bond is a three-party legally binding contract between an obligee, a principal, and a surety.

• The obligee requiring the bond and financially protected by it is WDSPS.
• The principal required to purchase a Wisconsin contractor license bond is the contractor obtaining an initial license or license renewal.
• The surety is the party guaranteeing the bond.

A regulatory or contractual violation by the principal that causes financial harm to the obligee or a customer can result in the injured party filing a claim against the bond. The surety will investigate each claim, and if it is found to be valid, the principal is legally obligated to pay it.

But that’s not as straightforward as it might seem. In guaranteeing a Wisconsin contractor license bond, the surety is agreeing to extend credit to the principal, if necessary, to ensure payment of valid claims. However, the surety doesn’t write a check to the principal. Rather, the surety will pay the claimant directly, creating a debt that the principal must subsequently repay to the surety within a certain timeframe. The surety can take legal action against a principal who does not repay that debt on schedule.