What is a contractor license bond for? What does a bond do? These are common questions regarding contractor's license bonds. The purpose of a license bond is to protect the public against fraud. The bond acts as a guarantee to the state license board (CSLB in California) that the contractor will abide by the terms of his license. It is a promise by the contractor that he will follow the laws and regulations that apply to his license.
There are several types of bonds. Each of the is a guarantee of either performance, payment or some other "obligation". The one most familiar to contractors is the License Bond. The license bond is a contract where in the surety (bond company) promises the state that the contractor will conform to applicable laws. In California this refers to the Contractors' State License Law (CSLL). Other states would have similar laws.
A bond is not insurance because the liability or risk, is not transferred to the surety company. The person obtaining the bond is still liable for damage or loss. If the surety is required to pay a claim they will in turn act to collect the claim amount from the person that purchased the bond. The bond is simply a guarantee regarding some "obligation".
You can read a more detailed description about license bonds from the California Contractors State License Board. Scroll down to "A Guide to Contractor License Bonds"
You can download a License bond application here if you have acceptable credit. If your credit is poor then you will need to download a different form here .
A Payment and Performance Bond (P & P Bond) and its related Bid bond is another common type of bond that a contractor may need on commercial or public works projects. When working for a school district or government agency a P & P bond is often required. A Performance Bond guarantees that the work will be "performed" or completed. A Payment Bond guarantees that the subcontractors will be paid. These two types of bond are usually sold together.
A contractor's bond is a financial assurance that a contractor will complete a job to satisfaction. The Payment and Performance bond guarantees that the project will be completed and that the subs will be paid for work they perform. If a contractor walks off a job or fails to complete it, the bond would cover this. When a contractors gets qualified for a P & P Bond he can then obtain a Bid bond for specific projects. The bid bond is a statement by the surety that they are willing to issue a bond in the amount stated on the bid bond. Bid bonds are inexpensive but it sometimes takes a lot of paperwork to get qualified for a bond.
A Bid Bond guarantees that the contractor will honor the bid the he provides for a particular project and that he will sign the contract if he wins the bid. In order to obtain a Bid Bond the Surety company will first ensure that they are willing to provide the Payment and Performance Bonds. The sequence is to qualify the contractor for a specific amount and they Bid Bonds can be provided up to the amount that the contractor has been approved for.
We offer California Contractors License Bonds and Arizona Contractors Bonds and we provide FAST service.
Venture Insurance Services has access to bond markets that can issue a bond for up to $400,000 based on a credit check. This is by far the fastest way to obtain a P & P Bond. You can download the application here.
Venture Insurance Services
124 E Olive Ave.
Burbank, CA 91502
866-726-8442