There are several types of bonds that you will need in order to perform certain types of work as a contractor. A contractor’s license bond is a license and permit bond that is specifically designed to help all types of contractors. Every type of contractor is required by the state in which they operate to carry a contractor license bond in order to be a licensed contractor, whether it is a plumber, electrician, general contractor or any other contractor.
Bonds are a requirement by law
Contractor bonds will assure your clients that you will operate in compliance with all of the local laws and statutes within the state that you are operating in. Currently, most permit bonds are being underwritten similar to other commercial surety bonds. Both, claims on the contractor’s license and personal credit history can be taken into account when issuing bonds. In some cases the surety may ask you for personal and company financial statements.
Though issued by an insurance company, a bond is not insurance. The insurance company is referred to as a surety or bond company. A license bond is, as you know, is a contract between the surety, principal (contractor), and the oblige (person for whom you are working for) and it provides financial benefit to the customer on behalf of the principal, ensuring that the award of money damages will be fulfilled in the event of a bond claim.
There are a variety of different bonding companies available to offer you an array of different options. Having that many companies at your disposal allows you the freedom to be selective about where you secure your bonds and at what cost. Because every contractor’s need is different and a license bond to operate in his/her state is required, having several options can be very helpful to you and your business. Speak to an agent about your specific needs pertaining to each job you are offering bids on.