Bond TypeLicense and Permit Bonds
What are contractor license bonds?
Contractor license bonds are required by a licensing authority as a prerequisite for aspiring licensees to hold before they can obtain the necessary license or permit for their specific industry or type of work.
There are three parties involved in a contractor license bond:
Principal: the contractor or individual/company purchasing the bond; the principal should match the details entered on a licensing application
Obligee: the licensing entity requiring the bond, like a local or state government office
Surety: the company that issues the bond to the principal; ContractorBonds.com works with numerous surety companies to find construction professionals the best rate
Continue reading to learn about the relationship between these three entities in the next section.
What do construction license and permit bonds do?
When a contractor (the principal) signs a construction license bond, he or she is contractually agreeing to adhere to all applicable laws and regulations enforced by the state or local government (the obligee). If the contractor is found guilty of violating any of the applicable laws, practicing negligence, or causing damages that result in financial hardship for consumers or project owners, a claim can be filed on the bond.
The surety backing the bond will reimburse harmed parties up to the full bond amount. If a claim is paid out, the principal is obligated to pay back the surety.
License and permit bonds also protect the obligee requiring the bond from any liability due to the principal’s negligence or fraudulent activities.
What are the specifics about license and permit bonds?
License and permit bonds are location-specific and/or specific to the type of work being done; therefore, the same bond cannot be used across different industries or projects. If a principal’s business deals in several different types of work, or across different geographical locations, the principal will be required to obtain separate license bonds before becoming legally authorized to do business.
Select a state to find the right contractor bond
ContractorBonds.com can get you bonded quickly and easily, regardless of the surety bond you require. We have compiled a comprehensive list of contractor bonds, allowing you to find the bond you need within minutes. Find your bond now by selecting the state you’ll be working in.
If you are unsure of the bond you need, check with the obligee to ensure you obtain the correct bond amount to meet all license or permit requirements for the type of work you’ll be performing.
Types of license and permit bonds in the construction industry
Contractor License Bond
Contractors are often required to purchase a contractor license bond before they can be legally licensed to work within states, cities, or local municipalities. Construction professionals enter into a legal guarantee when purchasing a surety bond, agreeing that they will work in accordance with all applicable laws and regulations for their industry, whether at a federal or local level. Separate contract bonds may be required for specific construction projects.
Contractor license bonds have different requirements that vary by state.
Florida: only contractors with a credit score below 660 need to get a license bond
Illinois: the state of Illinois has various county-, city-, and municipality-specific bonds
For example, the city of Bloomington, Illinois, requires HVAC contractors to obtain a $2,000 HVAC contractor bond; however, the city of Monmouth, Illinois, requires contractors to obtain a $5,000 contractor license bond for work within the city
Oregon: occupation-specific requirements apply
Construction professionals may be required to obtain multiple bonds, depending on industry and work locations.
Right of Way Bond
A Right of Way (ROW) bond protects consumers and obligees from any potential negligence when a contractor performs work in a public right of way. A public right of way refers to any type of public property used for transportation or public services, including sidewalks, public parking lots, sewage or water pipes, and power line systems. The type of work typically performed can include installation, maintenance, or removal of public systems.