FOR ALL YOUR SURETY BOND NEEDS.
California legally requires a variety of individuals, contractors, and organizations to secure surety bonds to conduct business across the public service industry. Apply for a California Surety Bond today! Single Source Insurance is a leading California bonding company providing bonds with a convenient online application system. Browse the most common types of bonds in this state, or contact us for a full list.
There are several different types of California construction bonds. The one that is required of all contractors operating in California is the contractor license bond. Every contractor seeking a new license or renewing an existing one must purchase a license bond that meets the requirements of the Contractors State License Board (CSLB), referred to in the surety bond agreement as the �obligee.�
The contractor license bond is a $15,000 surety bond guaranteeing that the contractor will comply with all provisions of California�s Contractor License Board. Failure to do so can result in significant fines and penalties, as well as criminal charges and court-ordered restitution for those suffering financial harm due to the contractor�s unlawful or unethical actions. The license bond ensures that funds will be available to compensate the obligee and/or any injured party with a valid claim for such a loss.
Additionally, California�s �Little Miller Act� (the state�s version of the federal Miller Act) requires contractors to purchase payment and performance bonds in order to work on state-funded public projects valued at $25,000 or more. These guarantee payment of subcontractors, workers, and suppliers and timely completion of the job according to contract specifications. They also provide funds to compensate any party incurring a financial loss as a result of the contractor�s noncompliance with the terms of the surety bond agreements.
The license bonding requirement applies to all contractors working in California. In some cases, depending on the status of a contractor�s license, additional license-related bonds may be required by CSLB, such as a disciplinary bond, qualifying individual bond, or LLC employee/worker bond.
Additionally, the �owner� of any public works project you�re thinking about bidding on will let you know what contractor surety bonds you may need to provide. Be aware that private project owners increasingly are establishing similar contractor bond requirements to protect themselves and their investors.
When a contractor (the �principal� in the surety bond agreement) commits a violation that results in a claim against the contractor�s license, payment, or performance bond, the surety bond company that issued the bond will first investigate to make sure the claim is valid and try to negotiate an amicable settlement if it is. But when that�s not possible, the surety bond company (referred to simply as the �surety�), will pay the claim even though the contractor bears full legal responsibility for paying claims.
In effect, the surety is lending the claim amount to the principal, and the principal must reimburse the surety in full, usually in manageable installments.
The cost of a California contractor bond is a small percentage of the required bond amount. While that required bond amount (penal sum) is established by the obligee, the surety decides what the premium rate will be for a given principal. The key factor influencing that decision is the principal�s personal credit score, which is a good indicator of the risk the surety will be assuming in paying claims on the principal�s behalf. Other considerations include the principal�s personal and business financial strength, contracting experience, and prior claims history.
With good credit, the premium rate should be in the range of 1% to 3%. Those with poor credit will pay a significantly higher premium rate.
Request a convenient online quote today, or call us to discuss the contractor bonds you may need in order to serve conduct your contracting business in California.
