A California Contractor License Bond is required by all contractors doing business in the state. Learn more about what these license bonds guarantee, what they cost and how to get one.
In California, the Contractors State License Board (CSLB) requires that a
“Contractor’s Bond must be in place before CSLB can issue an active license, reactivate an inactive license, or renew an active license. (Business and Professions Code Section 7071.6).”
Most contractors can obtain a California Contractor License Bond online in just minutes by simply filling out a form, paying the bond premium and printing their bond.
Better pricing may be available for contractors willing to submit more information.
Beginning January 1, 2023, California Bill 607 changed the required amount of the California Contractor License Bond to $25,000. The amount had previously been $15,000. Contractors that previously had a $15,000 contractor license bond in place will need to contact the surety bond company and increase their bond amount.
The board may double the amount of the bond required for the following reason under code section 7071.6:
The cost depends on the credit of the contractor. Many contractors using the online instant issue program can expect to pay about $220 annually. Contractors willing to provide more information may qualify for better pricing. Tier 1 pricing for contractors with excellent credit can get the $25,000 California Contractor License Bond for as little as $90 for one year. Bond premium for these license bonds is due annually as long as the bond is active.
Some surety bond companies provide contractors with discounts for purchasing multiple years in advance. These discounts can range from 20% – 40% depending on the surety bond company and the number of years purchased. For example, there is one surety bond company offering California Contractor License Bonds for $225 if a 3-year bond is purchased.
Usually if the license bond is canceled, the surety will refund the unearned portion of the bond premium.
A contractor only needs a few items to quickly obtain a bond online. These include:
Almost every contractor can get a license bond regardless of credit. A contractor with bad credit or bankruptcies may have to provide additional information and/or pay a higher rate but can still get a bond in most cases.
The bond is filed for the benefit of consumers who may be damaged as a result of defective construction or other license law violations, and for the benefit of employees who have not been paid wages that are due to them. Specifically, the California Contractor License Bond protects the following parties under California code 7071.5:
All claims except fringe benefit claims must be brought against the California Contractor License Bond within 2 years from the date which the claim occurred, or within 2 years of the contractor’s license being suspended or revoked. The date starts at whichever event occurred first.
For claims involving fringe benefits, a claim must be brought within 6 months of the fringe benefit delinquency being discovered, and a civil action must be brought in court within 2 years of the date the fringe benefits were due.
The licensed contractor is the principal on the contractor license bond. This party is responsible for meeting following the license regulations. The obligee is the State of California. This is the party benefiting from the bond on behalf of the public. The Surety is the bond company who is guaranteeing the Contractor’s obligation. If a valid claim is filed against the contractor, the surety may be liable for paying the claim.
The three-party nature separates the surety bond from an insurance policy which only has three parties.
A California Contractor License Bond is required for Newly licensed contractors. Fortunately, even new contractors can obtain a bond by clicking here.
The State of California requires that a contractor license bond have the following:
Unfortunately, fraudulent bonds do exist. It’s important to make sure the contractor bond meets these requirements to avoid having to get another bond and possibly pay another premium.
The only alternative that is acceptable is a Cashier’s Check or Bank Certified Check. The CSLB will no longer accept any other financial instruments effective January 1, 2019, by Assembly Bill 3126
California contractors may want to reconsider posting a Cashier’s Check though. First of all, it ties up cash that could be used in other places.
Secondly, if a claim does occur, the funds will be taken immediately with little defense. Alternatively, a claim against a surety bond required a trained surety person to investigate the claim. Learn more about surety versus cash.
A California Contractor License Bond must be continuous in nature. A bond must be in place as long as the contractor is licensed in the state. If the bond is cancelled for any reason, the contractor will need to file a new bond with the state of risk having their license suspended.
Like all surety bonds, California Contractors License Bonds do require indemnity. That means that if the surety pays a valid loss, they will seek to be reimbursed by the contractor. Contractors can read more about indemnity.
Contractors who have had their license suspended or revoked, will also need to obtain a Disciplinary Bond and file it with the Registrar before they can have their license reinstated.
The Disciplinary Bond is in addition to other bonds such as the Contractor License Bond.
The Registrar will determine the amount of the Disciplinary Bond. It depends on the seriousness and reason for the suspension. It must be more than the $25,000 for a Contractor License Bond but not more than ten times the amount or $150,000. The Disciplinary Bond must be on file for two years, but the Registrar may require longer. The company must also remain licensed during the disciplinary bond period.
Additional requirements of the California Contractor Disciplinary Bond are:
Many California Contractors will also need a Bond of a Qualifying Individual. Bill 607 also changes the amount of a California Bond of a Qualifying Individual to $25,000. These bonds were previously required to be in the amount of $12,500 and will also need to be increased for those with an existing bond in place. They can be purchased below.
Unfortunately, fraud exists in surety bonding. It is always a good idea to verify that the California Contractor License Bond you received is legitimate. You can read more about how to verify a surety bond and what to look for here.
California Contractor License Bonds are required for all contractors operating in California. These license bonds are easy to get and inexpensive. California contractors may also need Contract Bonds such as Performance Bonds, Payment Bonds and Bid Bonds. The surety bond experts at Axcess can help contractors with all their questions on surety. Contact us anytime.
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.