Getting your California contractor license? Before the Contractors State License Board (CSLB) can activate your license, you’ll generally need a contractor license bond.
But what does the bond actually protect, how much does it cost, and could you need more than one? Here are seven important things every California contractor should know.
1. A Contractor Bond Protects the Public, Not Your Business
A California contractor license bond is designed to protect eligible consumers, employees, and other parties against certain violations of contractor licensing laws.
For example, a valid bond claim may involve defective construction, certain licensing violations, or unpaid employee wages, subject to applicable laws and bond terms.
Unlike general liability insurance, a surety bond isn’t primarily intended to protect the contractor. If the surety pays a valid claim, the contractor may be responsible for reimbursing the surety.
2. A $25,000 Contractor Bond Doesn’t Cost $25,000
California requires a $25,000 contractor license bond, but that doesn’t mean you pay $25,000 to obtain one.
Instead, you pay a premium to the surety company. The premium depends on factors such as:
- Personal credit history and financial qualifications
- Bond type and required bond amount
- Bond term and underwriting requirements
- Previous bond claims, when applicable
- The surety company’s pricing
Many contractors qualify for relatively affordable premiums. The best way to determine your actual cost is to request a quote.
3. Some Contractors Need More Than One Bond
Depending on your business structure, qualifying individual, and licensing history, the CSLB may require additional bonds.
Contractor License Bond — $25,000
The standard bond generally required for active California contractor licenses.
LLC Employee/Worker Bond — $100,000
Contractors operating as an LLC must generally maintain an additional $100,000 employee/worker bond. This is separate from the standard license bond.
Bond of Qualifying Individual — $25,000
Some licenses require a separate qualifying individual bond, depending on the qualifier’s role and whether an exemption applies.
Disciplinary Bond — Amount Set by CSLB
Contractors with certain disciplinary licensing histories may be required to obtain an additional disciplinary bond. The amount is determined by CSLB under applicable law and may range from $25,000 to $250,000.
4. Your CSLB Application Number Helps Identify Your Bond Requirements
If you’re applying for a new contractor license, your CSLB application fee number can help identify your pending application.
If you already have a license, your contractor license number can help you check your status and applicable bond requirements.
You can review your information directly through CSLB:
5. Contractor Bonds Can Be Filed Electronically
California allows authorized surety companies to submit contractor bonds electronically to CSLB.
Electronic filing helps eliminate mailing delays and can simplify the licensing process. However, CSLB processing and approval times may vary.
Susanto Insurance Agency can help arrange bonds through participating surety companies that support electronic filing.
6. A Contractor Bond Is Not the Same as Insurance
Contractor license bonds and business insurance serve different purposes.
- Contractor bond: Provides financial recourse to eligible claimants for certain covered licensing violations.
- General liability insurance: Helps protect your business against certain covered third-party injury and property damage claims.
- Workers’ compensation insurance: Provides benefits for covered work-related employee injuries and illnesses.
A contractor bond does not replace general liability, workers’ compensation, or other insurance your business may need.
7. Getting a California Contractor Bond Quote Is Simple
Whether you’re applying for a new license, renewing an existing license, or need an additional bond, Susanto Insurance Agency can help you explore available surety bond options.
Before starting, it’s helpful to have:
- Your legal business name
- Your CSLB application fee number or license number
- The type of bond required
- Any additional instructions from CSLB