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Arizona Contractor License Bond

Arizona Contactor License Bond

Current and future contractors in Arizona need a license to operate their business legally. They also need an Arizona contractor license bond. This guide explains how this license bond works and what it means for your license and business.

What is an Arizona Contractors License Bond?

A contractor license bond is an essential part of the licensing process for contractors seeking licensure in Arizona. The contractor license bond is an agreement between the surety, the contractor, and the Arizona Registrar of Contractors. The bond requirement is in place as a consumer protection. Contractor license bonds also serve the purpose of boosting consumer confidence in hiring contractors. The reason is because someone who hires a contractor that doesn't deliver on expectations can file a claim against the Arizona contractor license bond seeking damages. They're guaranteed to receive a settlement as long as what they claim is true, which illustrates why bonds would make someone feel more confident about hiring a contractor.

What Are the Parties in an Arizona Contractor License Bond?

The Arizona contractor license requirements stipulate that contractor needs to have a surety bond before they are granted a state (or local) license and at all times after. In this and all other surety bond types, there are three parties entered into a legally binding agreement. Explaining the three parties helps make clear how Arizona contractor license bonds work:

  • Principal – The contractor is the principal, meaning they are responsible for obtaining the surety bond and also responsible for paying any claims filed against it. However, the principal does not have to pay for any claims filed against the bond that prove to be invalid under investigation.
  • Obligee – The obligee is the person or party that hires the contractor (the principal). Any financial losses the obligee suffers as a result of illegal conduct on the part of the principal can be recouped by filing a claim for compensation against the Arizona contractor license bond. Provided that the claim holds up after being investigated, the obligee is guaranteed a full settlement.
  • Surety – The surety underwrites the Arizona license bond, meaning it accepts the risk that the principal won't pay for claims he is liable to pay. Upon receiving a claim, the surety investigates it thoroughly. The principal must pay for valid claims, but if they don't for any reason, the surety will pay the obligee in full. The principal must promptly repay that amount (plus interests and fees) to the surety or risk loss of bond coverage and expensive legal action.

Why Do I Need an Arizona Contractor License Bond?

The contractor license bond is a kind of guarantee for the state that a contractor will conduct business in a manner congruent with applicable state laws and regulations. It tells the state that you as a contractor will always uphold high ethical and professional practices. The public also benefits from contractor license bonds. Being bonded sends the message that the contractor will complete the work in an acceptable manner and will seek to remedy any issues with the work performed if any should arise.

For all these reasons, a contractor in Arizona must obtain a contractor license bond before he or she can obtain the license necessary to work in the state legally. Working without a license comes with huge risks ranging from substantial fines and fees to permanent loss of license. Therefore, it's essential to have an active license at all times, meaning it's also essential to have an active surety bond at all times. You need one of these bonds because it's legally required of your business for as long as you're in operation.

What Do Contractor License Bonds Protect Against?

A contractor license bond is a form of guarantee that the licensed contractor will conduct business and complete work in a manner acceptable to state laws and regulations. If a contractor doesn't deliver, either by performing a job with poor workmanship or not completing a job, the potential for a claim to be made on the bond arises. This type of surety bond protects against bad workmanship by holding the bonded contractor financially liable for it. It also protects against someone losing money because of a contractor and not having a way to recoup their losses. Since surety bonds in Arizona have proven to be an effective deterrent against negative behaviors and a viable way to regulate the important Arizona construction industry, they're included in the Arizona general contractors license requirements, among others.

How Much Does an Arizona Contractors License Bond Cost?

Contractor license bond amounts vary in Arizona. The required bond amount is based on the license type: Residential, Commercial General, or Specialty, and the expected gross business volume. Bond amounts range from $2,500 for a Commercial Specialty Contractor with a gross volume of $150,00 or less to $100,000 for Commercial General Contractors with a gross volume exceeding $10 million.

Surety companies determine how much Arizona contractor license bonds cost using individual applicant determinations. The total surety bond cost depends mostly on the contractor's credit, and their record as a contractor to some extent, especially if the contractor has past bond claims. Contractors with good credit will typically receive lower bond quotes than a contractor with challenged credit. The typical price range for an Arizona contractor license bond is from 1.75% to 5% of the bond amount.

If you have a credit score below 700, have a blemish like bankruptcy or past bond claim on your record, or if you've been turned down for a bond elsewhere, Viking Bond Service is here to help. We run a special program designed to help more people secure the bonds they need.

How to Get a Contractor License Bond in Arizona

Contractors must purchase Arizona contractor license bonds and show proof of the bond to the Arizona Registrar of Contractors (ROC) to be licensed. These bonds are common and can be purchased from a surety bonding company licensed through the Arizona Department of Insurance. The contractor must pay premiums to keep the bond current for as long as the contractor license remains active.

It's good practice to avoid bond claims. Claims on the contractor license bond could lead to the surety canceling the bond. When this happens, the contractor will have to find a bond with a different surety, often with higher costs due to the prior claims history. Since the contractor license bond is a requirement to maintain licensure, it's best to resolve any issues with the performed work before it results in a claim on the bond.

In the event that a contractor loses his bond, his license becomes invalid. Any work performed without a valid license is illegal and exposes the contractor to the risk of fines and worse. For all intents and purposes, a contractor needs to keep his Arizona contractor license surety bond in good standing from the first day of business to the last.

How To Renew An Existing Arizona Contractor License Bond

The renewal process happens annually. The bondholder will fill out a new bond application and submit to another credit check. Underwriters will evaluate whether the contractor's credit risk has gone up or down in the past year, then adjust the premium price accordingly. The bond renews after the contractor pays the premium. Contractors need to provide proof of an active bond in good standing each time their license is up for renewal.

Best Practices for an Arizona Contractor License Bond

The Arizona contractor's license requirements are just one of many surety bond mandates that contractors encounter over the course of their careers. Depending on the type of work they do, contractors may need multiple bonds for every job they perform. The Arizona contractor license bond may be the first bond someone needs, but it won't be the last. Follow these best practices to make bonding as easy and inexpensive as possible over the long run:

  • Find a Bond Partner – Work with a surety agency like Viking Bond Service that can get you any and all the surety bonds you need without any more time, hassle, or expense than necessary.
  • Plan for Renewal – Renewal deadlines can sneak up, and the cost of renewal premiums can catch someone off guard. When necessary, plan for bond renewal so that coverage does not lapse and put anything else important into jeopardy.
  • Avoid Claims – Paying to settle claims costs significantly more than bond premiums. It can also raise the cost of future bonds and tarnish the reputation of a contractor in ways that make it harder to secure work. Learn what kinds of illegal conduct could lead to claims, then do whatever is necessary to work legally.
  • Settle Early – When claims do arise, settle them directly with the obligee rather than relying on the surety to pay. There will be interest and fees added to the debt a contractor must repay the surety. Unpaid claims can also cause bond coverage to lapse, make an Arizona contractor license invalid, and make any work performed illegal. Don't let unpaid claims make it impossible to work any longer.

Why You Should Get Your Arizona Contractor License Bond From Viking Bond Service

Why have contractors across Arizona chosen us as their long-term bond partner? For a few reasons: We make it fast and easy to get a bond; we keep premiums affordable and accessible; and we go above and beyond on behalf of those we serve. Most of all, we make bonding stress-free so that you can focus on your business above all. Give us a chance to earn your loyalty.

Get a Free Quote for an Arizona Contractor License Bond Today!

At Viking Bond Service we have earned our reputation as a top Arizona contractor license bond provider. Businesses and individuals in Arizona trust us to help them secure contractor license bonds, just like people across the nation have for over a decade. Our experienced team of licensed surety bond agents will get you through the simple Arizona contractor license bonding process, so you get the bond you need with no issues or headache.

Request a quote at your convenience. Contact us with questions. Or call us at 1-888-2-SURETY (1-888-278-7389) to speak directly with a bond expert.

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