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Contractor's License Bond

Serving Dallas, Fort Worth, Carrollton, Arlington, Austin, El Paso, Houston, San Antonio, Irving, Plano, Grand Prairie and throughout Texas.

What is a contractor surety bond?

Contractor surety bonds, or contractor licensing bonds, are required by state and local laws in the construction field. They are often confused with the bonds required for specific contracted construction projects, but this type of surety bond is meant for construction professionals in need of a general contractor license in the state where they plan on doing construction work.

Contractor license bonds are essentially contracts. They are legally enforceable and binding with three separate parties involved:

  • The principal, who is the construction professional being bonded
  • The obligee, the entity who is requiring the contractor to be bonded
  • The surety, the company that issues the contractor bond and guarantees the contractor's obligation

If the contractor doesn't comply with the terms outlined in the contractor bond, then they're in breach of contract. The obligee can then make a claim for damages against that bond. However, surety bonds don't work the same as insurance policies, where the potential for loss is assumed. Because of this, the surety doesn't absorb the loss resulting from the contractor failing to fulfill the bond's terms.

The contractor must reimburse the surety for any money paid when settling claims against the contractor bond, if any are made.

Is a contractor surety bond meant to protect the contractor from damages?

Contrary to popular belief, contractor licensing bonds aren't meant to protect the contractor from being held liable for damages. Surety bond insurance isn't the same as traditional insurance, which is meant to cover loss and damage.

A contractor surety bond is designed to protect the general public by guaranteeing that the bondholder (the construction outfit, or individual construction professional) will comply with all state and local construction codes, plus the stipulations in the bond's legal language. Upon purchase, the contractor agrees to work according to these terms. The general public (consumers) and government agencies are given surety from potential financial loss.

How much does a contractor bond cost?

Due to the different regulations and requirements by state, county, and other localities, the cost for a contractor licensing bond is highly varied. However, the cost is dependent on where the construction will take place, rather than where the construction outfit or professional is headquartered. Please contact us for more specific information on where your proposed project will be built.

Also, your bond premium is based on your credit rating. If you have excellent credit, you can expect to pay 1% or less of your bond amount on the standard market. If your personal finances are not as robust, but you are approved, bond premiums will be 2-5% of the bond amount on the nonstandard market.

Expediting the Contractor Surety Bond Application Process

Contractor bond applications are subject to underwriter review. Approval is based on your qualifications, as well as your credit score at the time of application. Having your credit report and construction license information handy will help expedite the process.

Our friendly and professional agents can be reached at (817) 590-9725 between 8:30a.m.-5:00p.m. M-F, and you can also reach out to us through our online contact form 24/7, where a contractor bond specialist will get back to you as soon as possible.

TMD Surety Bonds strives to make the bond application process as seamless as possible, and our surety experts are happy to answer any questions you have.

Call us today or apply online now!

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