The Cost of a Contractor Bond in California

WHAT IS A CONTRACTOR BOND?

California State Laws require that all licensed contractors should maintain a $15,000 license bond with the Contractors State License Board (CSLB) as a condition for maintaining an active license, or post cash in replacement of this bond. The CSLB requires some contractors to post disciplinary bonds, on a case-by-case basis, before commencing construction work in California.

The Cost of a Contractor Bond in California

This bond serves as protection for consumers who have been financially harmed as a result of a contractor’s work, or a contractor’s employees who may be owed unpaid wages. For example, if you hire a contractor to construct a swimming pool for your house and something goes wrong, the bond will serve as payment for damages, accordingly. This bond amount of $15,000 is increased by the state on a periodical basis. It increased from $12,500 as a result of a Senate legislation effective January 1, 2016.

CREDIT SCORE RATING

California Contractor Bonds are most of the time based on credit and other factors such as license history. HCC surety currently offers a bond that will not take credit into account for the first year if the contractor meets certain criteria.

In order to qualify, the new contractor must not have been associated with another license in the past, and must not have a different classification. Depending on one’s credit, the current cost of a license bond generally varies from around $100 per year with good credit and license history, to well over $1300 per year for those with poor credit or other factors such as a license complaint, bankruptcy, and prior bond claim. Contractors can post $15,000 cash with the state in lieu of a license bond.

DISCIPLINARY BOND

If a license has been revoked for a violation of the Contractors’ License Law, the company must file a disciplinary bond with the Registrar in order to reinstate or reissue the license (Business and Professions Code Section 7071.8).

In order to apply for this bond, the contractor must specify the reason of their application. The amount of this bond varies according to credit score.

QUALIFYING INDIVIDUAL BOND

The Qualifying Individual Bond or QIB ensures that payors comply with Division 3, Chapter 9 of the Business and Professions Code. This usually costs $12,500 annually and payments vary according to credit score.

FARM LABOR CONTRACTOR BOND

By posting this bond, contractors agree to comply with Labor Code provisions. If the contractor fails to do so, damages suffered must be paid in full amount. The Farm Labor Contractor Bond is worth around $25,000 a year.