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States and municipalities that license contractors nearly always require a contractor license bond as a prerequisite for obtaining a new contractor license or renewing an expiring license. Georgia is no exception to this rule.
A Georgia contractor license bond is a state-licensed contractor�s pledge to comply with all applicable state laws and regulations. The bond indemnifies the state against any liability for financial harm to a consumer resulting from the unlawful or unethical actions of a contractor licensed at the state level. It also provides a source of funds that can be used to compensate those who experience such losses.
In Georgia, residential and general contractors must be licensed at the state level, by the State Board for Residential and General Contractors. Purchasing a $25,000 Georgia contractor licensing bond is a prerequisite for obtaining a license from the State Board.
A number of municipalities and counties require contractors to obtain a local license as well as a state license. The required amount for contractor license bonds at the local level ranges from $2,000 to $25,000.
Contractor license bonds must remain in force at all times to prevent license suspension or revocation.
The three parties to the surety bond agreement for a Georgia contractor license are:
Regulatory non-compliance and other violations of the surety bond agreement that cause a consumer to suffer a financial loss can result in a claim being filed against the principal�s Georgia contractor license bond. When a claim is received, the surety will conduct an investigation to ensure that it�s valid and may attempt to negotiate a mutually acceptable settlement.
If the surety determines that the claim should be paid, the customary practice is for the surety to pay it on behalf of the principal. Extending credit to the principal in this manner creates a debt that the principal is legally obligated to repay to the surety. This ensures timely payment of the claim while giving the principal some time to reimburse the surety, typically in scheduled installment payments.
While the state has established the $25,000 required bond amount, the premium rate a given principal will pay for a Georgia contractor license bond is determined by the surety. The main concern for the surety�s underwriters is the degree of risk involved in extending credit to the principal. Therefore, the primary underwriting factor is the principal�s personal credit score. Although other factors also enter into the picture, such as the principal�s financial strength, industry experience, and prior claims history.
Those with excellent credit will pay a premium rate as low as 1%, but a contractor with lesser credit could be assigned a premium rate as high as 10% or more.
Request a convenient online quote today, or discuss your Georgia contractor license bond needs with one of our experienced surety bond specialists.
