If you are building or renovating property in Galveston, you must register with the city before you begin the work. Licensing contractors gives the city a degree of oversight over the work being done within its boundaries to ensure it meets local building and safety regulations. When you apply for a contractor license, you also must submit proof of a contractor’s license bond.
What Is a Contractor License Bond?
A contractor license bond in Texas is an agreement between a contractor, a bond company, and the City of Galveston. As part of this agreement, the contractor promises to follow local labor and building regulations. The bond protects the city and the community from poorly done or incomplete work.
If the contractor does not finish the project or an issue arises, the city of Galveston can file a claim against the bond. They can then use the funds to hire another contractor to correct or complete the work so that it meets local standards.
Why Contractor’s License Bonds Are Needed
Building codes exist to protect the physical and financial safety of the community. When buildings don’t meet the existing codes and regulations, they present a physical danger to the people who are in and around them.
For example, a staircase that doesn’t have the proper support may collapse and injure people or property. Misplaced exits around the building can create a safety hazard during an emergency evacuation. Similarly, a poorly constructed building can be an eyesore that lowers the value of properties in the neighborhood.
Repairing these structures and bringing them up to code can be costly for the city. With a bond in place, the city has an option for covering the costs they can incur if the contractor fails to or is unable to do the work they agreed to. Instead of finding a place in the city’s budget to pay for the work, it can file a claim against the bond.
Should a Contractor Be Licensed, Bonded, and Insured?
Before making this decision, it helps to understand the difference between being licensed, bonded, and insured. A licensed contractor is one who has met the minimum requirements for a license and has permission from the city of Galveston to work there. An insured contractor carries insurance to protect the individual contractor, company, or employees if an accident takes place at the job site. A bonded contractor has paid for a surety bond to help guarantee their work.
To be clear, a bond is not an insurance policy. Say, for example, a piece of construction equipment falls and damages a vehicle parked near the job site. The vehicle’s owner can file a claim against the contractor’s insurance policy to repair the damage or replace the vehicle. On the other hand, if the contractor has an emergency and doesn’t finish the work, the city can file a claim against the bond to get the money it needs to complete the project. Insurance protects the contractor. The bond protects the city.
How To Get Licensed and Bonded in Galveston
Like most regions in Texas, the city of Galveston has its own legal requirements for contractor licensing and bonding. Contractors must complete the application for contractor registration available on the city’s website. In addition to the application, the contractor must pay a registration fee, provide proof of liability insurance meeting minimum requirements, and submit proof of a bond. The bond must be a minimum of $25,000 and list “City of Galveston or Assignee” as the obligee.
Cost and Coverage of Contractor’s License Bond
The cost of a contractor’s license bond for $25,000 in coverage may be between $100 and $200 per year. This is typically a monthly fee that is paid for one year at a time. However, the cost for a bond can vary depending on several factors, and contractors should call or complete an online form to request a quote.
TMD Surety Bonds can provide contractor’s license bonds for contractors and clients in Galveston, helping development projects meet legal regulations. Our online filing allows for fast approval, meaning less time and resources spent waiting for building permit approval.