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A Contractor’s License Bond is a License and Permit Bond which is designed to assist all types of contractors. In many states contractor bonds are required and helps to assure that the contractor will operate in compliance with the local statutes as well as laws.  Unlike other types of contractor insurance, bonds are designed to guarantee contractor integrity, quality performance, and financial responsibility.  Bonds also ensure compliance with a contract and especially laws formatted by the state in which operation is undergone in.Salmen-contractor-bond

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For any business intending to insure an active license, reactivation of a license or for the maintenance of an actively renewed license must obtain a contractor’s bond.  A contractor’s bond must be filed with the state department of insurance in the state which issued the business license for a particular business through a licensed surety company.  The contractor’s bond is filed and designed for the protection of the consumer who may potentially be damaged as a result of defective construction or any unforeseen license violations, and to protect employees from loss of wages due for work completed.

The California Department of insurance lists the requirements for a contractor’s bond as such:

  1. The bond must be written by a surety company licensed through the California Department of Insurance.
  2. The bond must be in the amount of $15,000
  3. The business name and license number on the bond must correspond exactly with the business name and license number on the California State License Board’s records.
  4. The bond must have the signature of the attorney-in-fact for the surety company.
  5. The bond must be written on a form approved by the Attorney General’s Office.
  6. The bond must be received at the California State License Board’s Headquarters Office within 90 days of the effective date of the bond.

According to the U.S. Small Business Administration eligibility requirements for a small business contractor to be eligible for a surety bond guarantee, are as follows:

  1. A business must be classified as a small business.  The business combined with its affiliates must not exceed the size standard designed for the primary industry of the business together with its affiliates.
  2. A business must have a small business administration guarantee to obtain a bond
  3. The size of the public or private contract or subcontract must not exceed $6.5 million or $10 million if a Federal contracting officer certifies that Small Business Administration’s guarantee is necessary to obtain bonding.
  4. A business must satisfy credit, capacity and character evaluations completed by the surety company or an agency representing the surety company.
  5. There must be a reasonable expectation of successful contract performance.
  6. The contract must require a bond.
  7. The bond must have the signature of the attorney-in-fact for the surety company

Before any company can apply for a surety bond a surety company or bonding agent who represents a participating surety company must be chosen.  In addition a business, or business owner, must complete the surety’s application and decide whether to issue the bond, and whether a Small Business Administration guarantee is required.  If a business license has been revoked or suspended for any violation of the contractor’s license law, the contractor is required to file a disciplinary bond with the associated Registrar to reinstate, reissue or reapply for a new license.  The amount of the disciplinary bond may not be for less than $15,000 or exceed 10 times the contractor license bond, and must be on file with the associated state license board for no less than two years.  The company’s license must remain active and current while the disciplinary bond is filed.

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