Understanding Arizona Contractor License Bonds: A Comprehensive Guide

Get An Instant Quote on Arizona Contractor License Bonds or Purchase Instantly

instant surety bond quote button

Arizona contractors are required to be licensed and obtain Arizona Contractor License Bonds. These bonds vary in amount depending on the type of work being performed. Learn more about these bonds and how to easily purchase one instantly.

What is an Arizona Contractor License Bond?

An Arizona Contractor License Bond is a three-party guarantee that protects the public from a contractor’s inability to comply with any portion of Arizona Code §32-1152. The license bond protects:

  1. Anyone who is damaged by the failure of the licensee to build or improve a structure or appurtenance on that real property at the time the work was performed in a manner not in compliance with the requirements of any building or construction code applicable to the construction work under the laws of this state or any political subdivision, or if no such code was applicable, in accordance with the standards of construction work approved by the Arizona Registrar of Contractors.
  2. If a Residential Bond: It is for the benefit of and subject to claims by any person furnishing labor, materials or construction equipment on a rental basis used in the direct performance of a construction contract involving a residential structure.

Parties to an Arizona Contractor License Bond

The licensed Arizona contractor is the principal on the bond. This is the party promising to uphold the Arizona construction codes and pay their bill, if a Residential Bond. The obligee on the bond is the State of Arizona. This is the party receiving the benefit of the bond on behalf of the public. The Surety Bond Company is a third party that is guaranteeing that the principal contractor will fulfill the promises. If the contractor does not, an affected party can make a claim against the bond. The surety bond company will investigate the claim. If the claim is valid, the bond company will pay it and seek reimbursement from the contractor. 

Who Needs an Arizona Contractor License Bond?

With few exceptions, most contractors performing work in Arizona need to be licensed and provide a license bond. In general, if work being performed on a single project exceeds $1,000 including labor and material, or requires a permit, the contractor needs to be licensed and have an Arizona Contractor License Bond. This includes handymen and handywomen. According to statute 32-1151

“It is unlawful for any person, firm, partnership, corporation, association or other organization, or a combination of any of them, to engage in the business of, submit a bid or respond to a request for qualification or a request for proposals for construction services as, act or offer to act in the capacity of or purport to have the capacity of a contractor without having a contractor’s license in good standing in the name of the person, firm, partnership, corporation, association or other organization as provided in this chapter, unless the person, firm, partnership, corporation, association or other organization is exempt as provided in this chapter.”

What are the Required Bond Amounts for an Arizona Contractor License Bond?

The bond amount required for an Arizona Contractor License bond depends on the type of work performed by the licensed contractor and the anticipated Revenue for that contractor. The 4 major categories are Commercial General Contractor, Commercial Specialty Contractor, Residential General Contractor and Residential Specialty Contractor.

Commercial General Contractor Bond Amounts by Revenue

$150,000 and Less – $5,000 License Bond

$150,001 – $500,000 – $15,000 License Bond

$500,001 – $1,000,000 – $25,000 License Bond

$1,000,001 – $5,000,000 – $50,000 License Bond

$5,000,001 – $10,000,000 – $75,000 License Bond

Over $10,000,000 – $100,000 License Bond

This chart shows the required amounts of Arizona Contractor License Bonds for Commercial General Contractors based on their revenue. The Arizona state flag is at the top and the colors of the chart match the flag.

Commercial Specialty Contractor Bond Amounts by Revenue

$150,000 and Less – $1,500 License Bond

$150,001 – $500,000 – $7,000 License Bond

$500,001 – $1,000,000 – $17,500 License Bond

$1,000,001 – $5,000,000 – $25,000 License Bond

$5,000,001 – $10,000,000 – $37,500 License Bond

Over $10,000,000 – $50,000 License Bond

 

This charts shows the required amounts of Arizona Contractor License Bonds for Commercial Specialty Contractors. A map of the state of Arizona is at the top.

 

Residential General Contractor

Less than $750,000 – $9,000 License Bond

$750,001 and Greater – $15,000 License Bond

 

This chart show the required license bond amounts for Arizona Residential General Contractors by revenue. The background is a circle with the Arizona State flag in it.

 

Residential Specialty Contractor Bond Amounts by Revenue

$375,000 and Less – $4,250 License Bond

$375,001 and More – $7,500 License Bond

 

This chart shows the required license bond amounts for Arizona Residential Specialty contractors by revenue. Graphics representing construction are at the top with Arizona flags at the bottome.

 

Swimming Pool Contractors

Dual Licensed swimming pool contractors that perform commercial and residential work  shall follow the same revenue guidelines as commercial general contractors. 

What if an Arizona Contractor Has Dual Licenses?

If an Arizona Contractor has dual licenses, a license bond must be in an amount that meets both license requirements. For example, A Commercial General Contractor that does $1,000,000 in commercial work and also does Residential General Construction of $500,000 will need both a $25,000 commercial bond and a $9,000 residential bond. Regardless, an injured party may not claim more than the limit of the bond that applies for that work. For example, using the number above, a party harmed under a residential contractor could not claim more than $9,000 against the bond, even if a commercial bond is also in place.

Residential and Residential Dual Contractors

In addition to the Arizona Contractor License Bond, Residential Contractors and Contractors that have a Residential License as part of a Dual License, must also either: 

  1. Furnish an additional surety bond or cash deposit in the amount of $200,000 solely for actual damages suffered by claimants as described in section 32-1132. This bond is subject to the limits on the amounts that may be awarded to individual claimants as established in section 32-1132.

OR

  1. Participate in the residential contractors’ recovery fund and pay the assessment prescribed by section 32-1126, subsection G.

Specialty work as well, a license bond must be written that meets both bond amounts. Alternatively, the contractor can post two separate bonds. However, the most that can be claimed against a bond is still the maximum set by each separate bond amount, regardless of the amount of claims or if a contractor has more than one specialty.

 

Yellow button to instantly purchase an Arizona Contractor License Bond for dual commercial and residential licensed contractors.

 

Changes to the Arizona Contractor License Bond Amount

An Arizona Contractor License Bond can be increased anytime and given to the Registrar. However, the Registrar will only allow decreases at the time of renewal for the following fiscal year.

How to Obtain an Arizona Contractor License Bond

Arizona Contractor License Bonds are easy to obtain. The Residential Bonds are instantly issued and require no credit check. They can be purchased online in minutes. General Contractors needing a bond in the amount of $15,000 or less can also get a bond without a credit check. General Contractors needing larger bonds can also purchase Arizona Contractor License Bonds instantly with a simple credit check.

 

Instant Purchase Button for Arizona Commercial Contractor License Bond.

 

Instant purchase button for Arizona Residential Contractor License Bonds.

 

Can You Obtain an Arizona Contractor License Bond with Bad Credit? 

Generally, yes. Most contractors can still get an Arizona Contractor License Bond with bad credit and even bankruptcies. In those cases, the contractor may have to provide additional information or pay a higher rate, but there are usually options.

What Does an Arizona Contractor License Bond Cost? 

Arizona Contractor License Bonds cost 0.5% – 1% of the bond amount per year for most contractors. Some bond companies provide discounts for purchasing multiple years in advance. The premium will need to be paid each year that the license bond is in place.

 

This graphic shows the cost of an Arizona Contractor License Bond. A graphic with the state of Arizona on the left and a hardhat on the right.

 

Alternatives to an Arizona Contractor License Bond

 

As an alternative to the license bond, Arizona will let contractors post cash instead. They may also assign certificates of deposit or investment certificates from approved, FDIC insured institutions. 

There are many disadvantages to posting cash. First, it ties up a contractor’s cash that can be used for business purposes. Also, Arizona will hold the cash for two years after the license terminates to ensure that no claims are made. You can read about other considerations between surety bonds and cash here

Duration and Cancelation of an Arizona Contractor License Bond

An Arizona Contractor License Bond must be continuous and in place as long as the contractor is licensed in Arizona. However, the surety bond company may cancel the bond at any time by providing thirty (30) days written notice to the Arizona Contractor Registrar and notice to the contractor by certified mail. If the bond is canceled, the contractor must replace the bond before the 30 days is over, or risk having their license suspended. 

Other Requirements

Arizona Contractor License Bonds must be issued by a surety bond company licensed to do business in the state of Arizona. The contractor license bond must also be filed with the Registrar of Contractors at: 

Arizona Registrar of Contractors

1700 W. Washington St. Suite 105

Phoenix, AZ 85007

(602) 542-1525

1-877-692-9762

Find on Map

 

Not Insurance

Arizona Contractor License Bonds are not insurance. Like all surety bonds, they require indemnity. That means that if a loss occurs, the bond company will seek to be reimbursed from the contractor. This means losses should be avoided at all costs. This can be confusing to contractors as these bonds are often written by insurance agents and companies. You can read more about the differences between insurance and surety bonds here

Other Surety Bonds May Be Needed

In addition to an Arizona Contractor License Bond, contractors may need additional License Bonds as well. Many of these can also be purchased instantly on the Arizona Surety Bonds page. Commercial contractors may also need Contract Bonds such as Bid Bonds, Performance Bonds and Payment Bonds. Some of these bonds can be purchased instantly but many require additional underwriting.

Summary

Arizona Contractor License Bonds are required to be a licensed contractor in Arizona. Fortunately, these bonds are easy to obtain and inexpensive. These bonds protect the public and help ensure that Arizona consumers are protected from bad construction practices. Visit our Surety Bond FAQs page anytime to learn more about surety bonds. 

A copy of an Arizona Contractor License Bond Form can be found by clicking here.

Vice President at Axcess Surety
Vice President of Axcess Surety. Surety Bond and financial expert dedicated to helping contractors, businesses and individuals understand and obtain surety bond credit.
Josh Carson, AFSB
Latest posts by Josh Carson, AFSB (see all)
Featured Posts

All Rights Letters in Surety Bonding

Increased Limits of the SBA Surety Bond Guarantee Program

Parties to a Surety Bond

Surety Backed Letter of Credit

1 2 3 25
Contact Us

Axcess Surety is the premier provider of surety bonds nationally. We work individuals and businesses across the country to provide the best surety bond programs at the best price.

Headquarters:
5440 W 110th St Suite 300-2
Overland Park, KS 66211
12288 S. Mullen Rd.
Olathe, KS 66062
Copyright © 2024 Axcess-Surety.com ・All Rights Reserved Worldwide
magnifiercrossmenuarrow-down
Verified by MonsterInsights