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Texas Contractor License Bond

Contractor License Bonds in Texas - State Capital Building Austin, Texas

Contractor license bonds are among the most important types of surety bonds in the State of Texas. Among the requirements for those seeking a contractor license in Texas, the bond helps ensure that licensed contractors in the state can be trusted to do good work. With contractors operating in so many different trades such as plumbing, electrical, construction, and many others, the contractor license bond has a wide range of impact on the contracting industry.

Contractor license bonds serve multiple purposes, but they are mainly required as a consumer protection. The bond gives consumers financial recourse in situations where work performed by a contractor was not finished in an acceptable way. Although the bond itself is geared toward consumer protection, it also builds consumer confidence. A licensed, bonded contractor instills trust in consumers. Regardless of its intended purpose, however, the State of Texas makes this bond mandatory for anyone seeking a contractor's license, which is tens of thousands of people across the state. Learn the basics of bonding below.

What Is a Contractor License Bond and What Does It Cover?

A contractor license bond provides a form of guarantee that the bonded contractor will perform the job in a manner acceptable to applicable trade and workmanship standards. The bond gives the contractor additional incentive to perform quality work and stand by his/her work. The bond also promotes problem resolution in instances where issues may arise with work completed by the contractor.

Contractor license bonds are an agreement between the state representing the public, the surety who backs the surety bond, and the Contractor who performs the work. The surety provides a financial backing of the contractor's performance on jobs he/she is hired to complete via this agreement. In instances where a contractor does not complete the work in accordance with any applicable state regulations or standards, the affected consumer may claim on the bond up to the bond amount.

If a claim is found to be valid by the surety, a payment is made to settle the claim. Unlike an insurance policy, the contractor is responsible to the surety for any amount paid out on claims. For this among other reasons, it’s best for contractors to avoid bond claims and settle any workmanship issues before they escalate.

The contractor license bond builds confidence with the public and individual customers. It gives them the security of knowing that they've got financial recourse if work is not completed or completed incorrectly. Customers prefer to work with bonded contractors.

Texas contractor license bond requirements also help to keep unscrupulous contractors out of the industry. For various reasons, these contractors won't be able to secure a bond, so they won't be able to secure a license either. Keeping these bad contractors out of the industry elevates the quality of the Texas construction industry overall and helps to instill confidence in present and future customers. That is to say, Texas contractor bonds are as good for contractors as they are for the people who hire them.

The Parties in a Texas Contractor License Bond

There are three parties:

  • Principal - The party that obtains the bond and pays for claims.
  • Obligee - The party that files claims for damages against the bond.
  • Surety - The party that issues bond to the principal and pays claims to the obligee. After paying, the surety collects the amount of the claim (plus interest and fees) from the principal.

How to Get a Contractor License Bond in Texas

Contractors can purchase Texas contractor license bonds from a surety bond company licensed by the Texas Department of Insurance. The contractor must keep the bond current by paying annual premiums for as long as the contractor license is active. The process of obtaining the bond is simple; in most cases it can be completed in as little as a day, and only involves a general commercial bond application, a credit check, and payment of premium.

In Texas, there are electrical contractor licenses and plumbing contractor licenses, as well as specialty contractor licenses—and all those with licenses must be bonded. The Texas Department of Licensing and Registration is in charge of licensing electricians and the Texas State Board of Plumbing Examiners handles licensing plumbers. Specialty contractor licenses such as building, landscape, roofing, etc. are issued by individual cities and are subject to their fees, regulations, and requirements.

If you're unsure whether you need a bond and what kind you need, Viking Bond Service can help. Let our team of experts explore the requirements for you. That way, you get the best information available without having to hunt it down yourself. Plus, you can be sure you're meeting all your requirements in terms of Texas contractor bonds and, in the process, putting your business on solid standing in the eyes of the licensing bodies.

The Cost of Texas Contractor License Bonds

Surety companies consider several factors when determining the amount to quote for the Texas contractor license bond. Among the factors considered is credit, good credit can lead to lower quotes, although quotes for applicants with credit challenges are provided as well. As credit improves year over year, the bonds can be re-underwritten for lower premiums.

Contractor license bond amount vary from city to city. They range anywhere from $2,000 on up to $100,000. The typical price quoted for these bonds is anywhere from 1% to 3% of the bond amount, again, typically the better the applicant’s credit, the lower price quoted will be.

If you're worried that credit issues could make it hard to get a bond - or if you've been denied a surety bond before because of bad credit - rely on Viking Bond Service. We offer a bad credit surety bond program designed to get more Texas contractors approved for bonds (so they can get fully licensed) regardless of their credit. We don't guarantee approval. But we do everything possible to get applicants approved while keeping bond premiums affordable. That's our promise.

How to Renew a Texas Contractor License Bond

Just as important as getting a bond before getting a license, is keeping the bond active and in good standing. Most surety bonds expire after 12 months, at which point they must be renewed. Failure to renew a bond will immediately invalidate a Texas contractor license and make it illegal to conduct business. Therefore, it's critical to stay on top of the renewal process. That process looks a lot like the initial bond application. You will submit to a credit check and supply the surety with updated details about your finances and business standing. The surety will then quote you a new premium price based on any changes to your application. The price could go down if your credit score has gone up in the previous year, or the opposite could happen. Either way, Viking Bond Service provides you plenty of advanced notice about your renewal. When it comes due, we make the process of renewing your Texas contractor bond for another 12 months as straightforward as possible.

Texas Contractor License Bonds by Viking Bond Service

Getting your Texas contractor license bond is easiest with a reliable, experienced bonding company. You can trust Viking Bond Service with your Texas contractor license bond request. We’ve provided our Texas clients with contractor bonds across the Lone Star State for over a decade. Our process is stress-free, easy, and fast, so choose Viking Bond Service to get started with an online quote request now.

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