What a contractor bond covers
- License bonds required by a state, county, or city to get licensed
- Performance bonds that guarantee a project gets finished
- Payment bonds that guarantee subs and suppliers get paid
- Bid bonds for public and commercial bids
What a contractor bond does not cover
- Your own losses, since the bond protects the other party
- Claims you do not repay: the surety pays first, then collects from you
How a bond works
Three parties sign on: you, the surety company, and the party the bond protects. If you break the rules or walk off a job, the protected party can claim against the bond. The surety pays, then expects you to pay it back.
What a bond costs
You pay a yearly premium that is a small percentage of the bond amount. Good credit and time in business bring the rate down. A $10,000 license bond often costs a few hundred dollars a year or less for a contractor with solid credit.
Where bonds come up
License bonds vary a lot by state and city. Electricians, plumbers, HVAC techs, and general contractors face bond rules most often, while many handyman and cleaning businesses need one only above certain job sizes or in certain cities.
Which trades need a contractor bond?
How often each trade needs this coverage, based on what clients, GCs, and states usually ask for.
| Trade | How common | Why |
|---|---|---|
| Electrician insurance | Usually required | Many states and cities require a bond to license |
| Plumber insurance | Usually required | Common for state or city plumbing licenses |
| General contractor insurance | Usually required | License, bid, and performance bonds |
| Janitorial insurance | Usually required | A janitorial bond answers client theft concerns |
| HVAC insurance | Most carry it | Many states license HVAC work |
| Concrete insurance | Most carry it | Common on commercial and public jobs |
| Handyman insurance | Depends | Where your city or state requires one |
| Landscaping insurance | Depends | For pesticide work or where your city requires it |
| Painter insurance | Depends | Where your state or city requires a contractor license |
| Carpenter insurance | Depends | Where your state requires a contractor license |
| Flooring insurance | Depends | Where your state requires a contractor license |
| Drywall insurance | Depends | Where your state requires a contractor license |
| Pressure washing insurance | Depends | Where your city requires one |
| Fencing insurance | Depends | Where your state requires a contractor license |