What Are License Bonds?
License Bonds are commercial surety bonds that government agencies require business owners to obtain before the business owners can be legally licensed in certain industries, such as insurance brokering, mortgage lending, and construction.
The purpose of License Bonds is to protect consumers by ensuring that businesses within these sectors follow laws and regulations. In the event that a contractor breaks a law or statute, and a consumer is harmed, the consumer can make a claim against the bond. The surety then pays out the amount of the claim to the consumer, and the principal must repay the surety.
Who Are the parties Involved in License Bonds?
There are three parties involved with License Bonds:
The principal is the person or company who secures the bond to guarantee that they will comply with local laws and regulations.
The obligee is the one who benefits from the bond. In the case of most License Bonds, this is the public and/or the state, who can make claims against the bond in the event of wrongdoing on the part of the principal.
The surety underwrites and issues the License Bond.
What Types of License Bonds Are There?
There are many types of License Bonds for various businesses and professional occupations. Some of the more well-known bonds include:
Alcohol, Liquor License Bonds: These are compliance bonds to ensure that the licensee will abide by regulations, laws, and statutes related to their place in the liquor industry. There are a variety of Alcohol, Liquor License Bonds, such as alcohol manufacturing, warehousing, wholesaling, retail, and transportation bonds. Depending on the nature of an applicant’s business, they may need one or more of these bonds.
Contractor License Bonds: Construction professionals require Contractor License Bonds before they can become licensed in many states. Contractor License Bonds are commercial bonds, and not to be confused with the Contract Bonds that construction companies need for specific projects, such as Bid Bonds, Performance Bonds, and Payment Bonds.
Mortgage Lender Bonds and Mortgage Broker Bonds: These bonds are required before one can become a mortgage lender or broker. They exist to protect the state and the public against any potential losses due to wrongdoing on the part of the mortgage lender or broker.
When Do You Need a License Bond?
License Bonds typically are required before obtaining the professional or commercial license that they are tied to, and usually must be maintained for as long as the license is in effect, although the laws vary from state by state, and by the type of License Bond.
In some cases, you may need more than one License Bond to obtain a single professional license, such as a local Contractor License Bond and a state Contractor License Bond. In each case, the licensing government body should tell you which bonds are required of you.
You can also contact Viking Bonds, and one of our knowledgeable, dedicated License Bond professionals will help you determine which bond(s) you need.
How Much Are License Bonds Written for?
The amount of the License Bond varies widely based on the type of License Bond, the state that issues the bond, and the personal credit of the applicant. For example, Contractor License Bonds usually range from $1,000 to $50,000, sometimes higher. Meanwhile, Mortgage Broker Bonds can range from $10,000 to $100,000. Generally, the government agency requiring the bond will have a guideline to let you know how much your bond will need to be written for.
How Much Do License Bonds Cost?
The cost of a License Bond is based on a percentage of the total bonded amount. Just as the bond amount can vary widely, so to can the cost. The type of License Bond, the credit of the applicant, the risk of the bond, and the state issuing the bond all factor into the cost of the bond.
What Do You Need to Secure a License Bond?
The specific bond form: The document that contains the wording of the bond. Usually, the governing agency issuing a professional or commercial license will require specifically worded bond forms. Most of the time, we have these forms on file at Viking Bonds.
The bond amount: The governing agency that requires the bond will specify the required bond amount.
Contact Us for More Information:
To find out more about License Bonds, contact us today to speak to one of our dedicated, knowledgeable, and friendly License Bond professionals.
You can give us a call at 1-888-278-7389, or complete the contact form on this page, and one of our agents will contact you.