Home / Home Improvement Bond

Home Improvement Bond

If you plan to work as a contractor on home improvement projects, you may need a specialized surety bond called a home improvement bond (or home improvement contractor bond). States where you need this bond include Maryland, Tennessee, New York, Ohio, Texas, and Washington, D.C. Municipalities may also require home improvement bonds, meaning contractors almost anywhere may need a bond for home improvement projects. We cover the basics below.

What is a Home Improvement Bond?

Like all other surety bond types, this one holds one party accountable for misconduct that causes damages to another party. Specifically, if a contractor violates state or local laws, they are accountable for any damages caused to the homeowner and their property. When that happens, the homeowner may file a claim against the bond. They are guaranteed a settlement by the company that issues and backs the bond. After paying, that company (called the surety) will collect the settlement amount from the contractor who triggered the claim and took liability for it by signing the home improvement bond agreement.

How Does a Home Improvement Bond Work?

Let's use an example to illustrate a home improvement bond in action:

• A homeowner hires a contractor to perform a major renovation project.
• Later, it's clear the contractor cut corners and created an unsafe space.
• The homeowner files a claim equal to the damages caused.
• The surety investigates the claim to verify the details.
• Homeowners with a valid claim receive an immediate settlement in full.
• The final part of the process is for the contractor to repay the surety or else have the debt sent to collections.

By making a contractor responsible for their own misconduct, home improvement bond requirements create an incentive to run a lawful, ethical business. They also create a mechanism for anyone harmed by a contractor to recoup their losses through the claims process, which moves faster than the courts.

Home Improvement Bond Requirements

Home improvement surety bond requirements vary by state. In Ohio, for example, a contractor must obtain a surety bond worth $25,000 – which denotes the maximum amount the surety will pay to settle claims – while in Tennessee they need a $10,000 bond. Acquire any bond required by following these steps:

1. Complete a bond application
2. Submit to a credit check
3. Pay the bond premium
4. Provide proof-of-bond to the required authority

Home Improvement Bond Costs

Contractors will pay a small percentage of the bond's total value to activate bond coverage. The exact cost of a surety bond is quoted on an individual basis and depends largely on credit standing. Since contractors most often need home improvement bonds as part of licensing requirements, they must keep those bonds active and in good standing for the license to remain active as well. Contractors will repay the premium at renewal time, but it could be higher or lower than before based on credit changes.

Viking Bond Service — Serving America's Contractors

If you are someone who needs a home improvement bond, make sure you have the right bond partner. Viking Bond Service works with contractors across the country, making bonding easy, affordable, and stress-free. Explore how much a bond would cost you by requesting a quote at any time. You should get a figure back in under 24 hours! We are also happy to answer your questions about anything and everything. Contact us online or call 1-888-2-SURETY (1-888-278-7389).