Contractor's License Bond

What is a Contractor License Bond?

In most states across the U.S., contractors are required to have a surety bond as a condition of licensing. The bonds may be required at the local, county or state level - the party who requires the bond is called the obligee. Contractor License Bonds (CLBs) guarantee that the contractor will comply with certain regulations and licensing requirements. They are meant to protect consumers and government entities from financial losses.

Several contractor types may need bonds. There could be different requirements for residential and commercial contractors. If a contractor performs multiple types of work, they may need multiple bonds, depending on obligee requirements. Here are some examples of common CLBs:

>  A/C and Heating Contractor

>  Electrical Contractor

>  Elevator Contractor

>  General Contractor

>  Sidewalk Contractor

>  Roofing Contractor

Contractor License Bonds vs. Contract Surety Bonds

Contractor License Bonds

CLBs are a type of commercial license and permit bond. A contractor must have them in place before they can do work in most states, and the bond must remain in force the entire duration of the contractor's career. The bond amount can vary based on the bond's requirements, type of work or amount of work being performed.

Contract Surety Bonds

Contract surety bonds are typically required for specific construction projects. The bond amount is based on the size of the project and the bond guarantees that the contractor will perform the work and will pay subcontractors, laborers and material suppliers. The bond is only required for the duration of the specified project.

Merchants Bonding Company specializes in both CLBs and contract surety bonds, so feel free to contact your underwriter with questions.