A California contractors license bond is a requirement before a license to operate will be granted. The bond is also required if the license lapsed and is being reactivated and for the ongoing renewal of the license. California state law demands this for the benefit of consumers who may suffer financial or other damage as a result of faulty workmanship, non-completion of contract as well as for the benefit of the contractor’s employees who are owed wages. There are a number of specific requirements that must be fulfilled prior to the issuance of the license, in the event the license has been revoked for a violation, there are more stringent requirements to have the license reinstated.
A California contractors license bond provides financial protection to the owner in the event the job which was entered into under contract by a contractor is not done as set out in the contract. If the contractor defaults and as a result leaves the job unfinished, the bond will allow another contractor to be hired to complete the job per spec. In the case of a contractor walking off the job there is a good possibility that there will be suppliers and sub contractors which have not been paid for their goods and services; the contractors bond also covers these eventualities.
The minimum amount of the bond is $12,000 and it can be purchased from a surety company or an insurance company. Just like an insurance policy, a premium will have to be paid annually to keep the bond current and in force. The premium amount is not set; it all depends on the financial history of the contractor. When the owner enters into the contract with the construction company, the name of the surety company is disclosed, in the event of claim the homeowner has to show proof to support the claim.
A state mandated contractors license bond is a valuable tool; it is something that assures the customer that they are protected in the event something goes wrong during the term. California homeowners like the idea of working with contractors that are bonded and sub contractors and suppliers can comfortably extend credit knowing they are protected. If the job is quite large, the contractor may have to take out a bond larger than that mandated by the state.
As a contractor you will need a California contractors license bond issued by a surety company licensed by the California Department of Insurance. You are invited to discuss your needs with BuySurety.com.
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