California contractor’s bonds: FAQs

Required to acquire and keep their licenses to work in the state, California construction workers should have an understanding of contractor’s bonds.

According to the California Department of Consumer Affairs, there are approximately 290,000 licensed contractors across the state. Carefully regulated for the benefit of consumers and workers alike, the construction industry imposes numerous requirements on workers. This includes the necessity to have a contractor's bond in place. In order to help maintain their licensing and ability to work in the state, it may help to have an understanding of this type of liability coverage.

What is a contractor's bond?

A contractor's bond is a guarantee between a contractor, a state-approved surety company and the Contractors State License Board, or CSLB. In the event violations of the California Contractor License Law occur, this type of liability coverage ensures the employees, customers, venders and suppliers will be compensated for any resulting financial damages, while relieving the board of any financial responsibility.

It is important to keep in mind that, unlike insurance, contractor's bonds are fully indemnified. This means that the contractor is obligated to repay the surety amount of any claims that are paid out on their behalf as specified in their agreement terms.

Who is required to purchase a contractor's bond?

With few exceptions, individual workers and businesses who alter or construct any buildings, parking facilities, roads, highways or other structures in the state of California are required to be licensed as contractors through the CSLB. This is the case provided the cost for the labor and materials for one ore more of the project's contracts is at least $500. In order to obtain an maintain their license, workers are required to have a contractor's bond in place. Should their coverage lapse, their licenses may be suspended and performing any work may result in disciplinary action.

What are the requirements for contractor's bonds?

In addition to being written by a licensed surety company, there is a number of requirements for contractor's bonds. These include the following:

  • The bond must be for the sum of $15,000
  • The bond's license number and business name must match those on record with the CSLB
  • The bond must be written on the approved form
  • The surety company's attorney-in-fact must sign the bond

Once they have obtained a valid bond, workers must submit it to the CSLB within 90 days of its effective date.

Seeking legal guidance

Whether managing a project or performing the work themselves, contractors in California must often wear many hats. However, it is understandable that navigating the legal complexities of the construction industry may not be their forte. Therefore, those who are seeking a license to work in the state, or those who are already working, may benefit from obtaining legal counsel. An attorney may explain what is expected of them and their options, as well as guide them through the legal process.