If you are a contractor, it means you have a license to take up projects and offer your services for a fee. However, you’ll also need to have a contractor license bond to be eligible to get a license and provide services.
Your main job as a contractor or a contractor company is to accept projects belonging to your niche, complete the job as per the agreement with the clients, and get paid for it. But it’s not always this straightforward. Complications may arise that could lead to losses either for you or your clients.
Insurance protects you from such risks. But what about your clients? That’s where the contractor license bond comes into the picture. It is a type of surety bond you take to protect your clients and thus protect your company’s reputation.
In the United States, each state has its rules and regulations to apply for a contractor license bond. You’ll get into a third-party relationship where the government agency/ client is called an obligee. You are the principal party and the one responsible for the bond. The third party is the Surety Company which agrees to pay the obligee on your behalf if they file a claim.
How it Works
If the oblige flies a claim that the contractor didn’t adhere to the rules or didn’t complete the project as per schedule, the surety company will verify the claim and pay the obligee. The contractor will then repay the surety company.
The contractor license bond is limited to the state. It means that you’ll need to take one bond for each state you work in. The minimum bond amount and other rules vary depending on the state laws.
How Does Contractor License Bond Protect Your Company?
The first and biggest benefit of being a bonded company is that it gives you credibility. License, insurance, and contractor license bond are three primary deciding factors. People look for these three words when they search for a service provider.
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Being a bonded company makes you…
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