California Contractor License Bond: A Comprehensive Guide
November 10th, 2020
This guide provides information for insurance agents to help contractors on California Contractor License bonds
At a Glance:
- Average Cost: $102 – $450 per year, based on the business owner’s credit
- Bond Amount: $15,000
- Who Needs It: All individuals and businesses seeking to obtain a contractor license in the State of California
- Purpose: To ensure the public will receive compensation for any damages should the contractor fail to comply with contractor licensing law
- Who Regulates Contractors in California: The California Contractors State Licensing Board (CSLB)
The California Contractors License Law and Reference Book requires contractors operating in the state to obtain a contractor license with the CSLB. The California legislature enacted licensing laws and regulations to ensure that contractors engage in ethical business practices.
In order to provide financial security for the enforcement of the license law, contractors must post a cash deposit or purchase and maintain a $15,000 contractor license surety bond to be eligible for licensure.
What is the Purpose of the California Contractor License Bond?
California requires contractors to purchase the Contractor License Bond as part of the application process for the Contractor License. The bond ensures that the public will receive compensation for financial harm if the contractor fails to comply with the licensing regulations. In short, the bond is a type of insurance that protects the public if the contractor breaks licensing laws.
How Can an Insurance Agent Obtain a California Contractor License Bond?
BondExchange makes obtaining a California Contractor License Bond easy. Simply login to your account and use our keyword search to find the “contractor” bond in our database. Don’t have a login? Enroll now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone (800) 438-1162, email, or chat from 7:30 AM to 7:00 PM EST to assist you.
At BondExchange, our 40 years of experience, leading technology, and access to markets ensure that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.
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Is a Credit Check Required for the California Contractor License Bond?
Yes, surety companies will run a credit check on the owners of the company to determine eligibility and pricing for the California Contractor License bond.
Contractors with excellent credit and work experience can expect to receive the best rates. Contractors with poor credit may be declined by some surety companies or pay higher rates. The credit check is a “soft hit”, meaning that the credit check will not affect the contractor’s credit.
How Much Does the California Contractor License Bond Cost?
The $15,000 California Contractor License surety bond costs between $102 to $450 per year. Insurance companies determine the rate based on a number of factors including your customer’s credit score and experience. The chart below offers a quick reference for the approximate bond cost on the $15,000 bond requirement.
$15,000 California Contractor License Bond Cost
|Credit Score*||Bond Cost (1 year)|
|650 – 719||$119|
|625 – 649||$128|
|600 – 624||$240|
|599 or below||$450|
*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.
How Does California Define “Contractor”?
To paraphrase the California Contractors License Law and Reference Book, a contractor is any person or business entity who constructs or alters any building or highway in the state of California as an independent company. Exemptions to this definition include:
- Any project whose total cost is $500 or less
- Government personnel working on public projects
- Officers of any court
- Public utility companies
- Oil/gas operations performed by a property owner
- Individuals working on their own property or partnering with a licensed contractor working on their property
- Licensed retail furniture dealers who contract with licensed carpet installers
- Licensed security alarm company installers
- Individuals installing satellite antennas on residential property
How Do Contractors Apply for a License in California?
Contractors in California must navigate several steps to secure their contractor license. Below are the general guidelines, but contractors should refer to the California Contractors License Law and Reference Book for details on the process.
License Period – The California Contractors license is valid for two years from the date of issuance and must be renewed before the expiration date. Contractors can reactivate expired licenses within a period of 5 years from expiration. Anything beyond that 5 year period will require a new application.
Note, contractors can opt to place their license in an inactive status which will allow the contractor to reactivate their license when they resume contracting without having to reapply. Contractors must pay the inactive renewal fee of $225 to keep the status.
Step 1 – Meet Qualifications
Contractors in California must meet the following minimum requirements to be eligible for licensure:
- Be 18 years old or older
- Have either a valid social security number or individual taxpayer identification number\
- Be able to adequately manage the daily duties of a construction business or represented by someone who is able to (more on this later)
Step 2 – Designate a Qualifying Individual
At least one owner or employee of the contracting business must be designated as the qualifying individual for each license class. The qualifier must have at least 4 years of experience, within the past 10 years, in the trade the contractor is applying for (apprenticeships and technical training count as experience) and pass the required exams. Contractors must submit a Certification of Work Experience Form for all qualifiers with their application.
Step 3 – Determine the License Classification
California requires contractors to obtain specific licenses corresponding to the nature in which the contractor’s business operates. Below are the different classifications of the California Contractors License.
- Class A: General Engineering Contractor – Completes projects that require specialized engineering expertise
- Class B: General Building Contractor – Performs contract work that utilizes at least two unrelated building trades. General building contractors can hire specialty contractors to perform specialty work.
- Class C: Specialty Contractor – Perform specialty work that requires a specific skill set. Contractors can find definitions for all 42 specialty contractor classifications here.
Step 4 – Complete the Application
Contractor license applications should be mailed to:
Contractors State License Board
9821 Business Park Drive
Sacramento, CA 95827
Contractors must complete the application, including the following steps:
- 4.a Business Name – Contractors must choose a business name that adequately reflects their license classification type
- 4.b Business Address – Contractors must have an address where official documents and all correspondences can be sent. This address will be made available to the public.
- 4.c Business Type – Contractors will need to register their business with the California Secretary of State and classify their business as either a sole owner, partnership, LLC, or corporation
***Contractor’s businesses that are organized as an LLC will have an additional bond and insurance requirements. For more information about the specific requirements for LLC check out our LLC Bond Page. ***
Step 5 – Pay the Original Application Fee
Contractors must pay a $330 original application fee when submitting their application along with an additional classification fee of $75 for each additional license class.
Step 6 – Obtain Fingerprints
Once the contractor has submitted their application, they will receive instructions on how to obtain a copy of their fingerprints. Contractors will need to submit a copy of their fingerprints to the CSLB for review.
Step 7 – Pass the Exam
Contractors will need to pass three different examinations before being issued their full license.
- Online Asbestos Exam: Open-book exam required for all contractors that are taken online here.
- In-Person Exams: Contractors should schedule the exams after submitting the application. The exams include:
- Law and Regulations – general exam of California contractor law
- Trade/Classification – specific to the classifications selected by the contractor
Contractors will be mailed an exam study guide before their exam date and should watch this video to determine what to expect on exam day.
Qualifiers who have completed an exam for the trade selected on the application within the past five years, or who have been a qualifier for a licensed contractor of the same trade type in the past 5 years, can submit an Exam Waiver form in lieu of taking the test.
Step 8 – Pay License Fee
After the qualifier has passed the required exams, the contractor must pay an additional $200 license fee before being issued their license.
Step 9 – Purchase a Surety Bond or Deposit Cash
Contractors must deposit cash or purchase and maintain a $15,000 contractor license surety bond. The contractor must have a license number or application fee number issued by the CSLB before they can file the bond.
Step 10 – Purchase Insurance
- All businesses in California with employees must obtain worker’s compensation insurance. Contractors with employees must obtain worker’s compensation insurance and submit proof of insurance with their application.
- Contractors with no employees must fill out and submit an exemption form to the CSLB.
- Businesses organized as an LLC will also need to purchase liability insurance with limits between $1-5 million (more on this topic below).
What Other Bonds or Insurance Are Required for California Contractors?
Contractors in California may be required to purchase additional bonds and insurance coverage depending on their business type. Readers can click on the below links to view our bond pages for the following bonds associated with the California Contractor License:
- Qualifying Individual Bond – A $12,500 bond must be purchased and maintained for the qualifier if they own less than 10 percent of the business entity
- LLC Employee/Worker Bond – LLCs must purchase and maintain an additional $100,000 surety bond and obtain liability insurance with limits between $1,000,000 to $5,000,000
- Disciplinary Bond – Contractors who have had their licensed suspended for disciplinary reasons will need to purchase an additional surety bond with a limit between $15,000-$150,000
There are also various local permit bonds that contractors must obtain when operating in certain municipalities. Download a full list of the local bond requirements for California Contractors.
How Do Contractors Renew Their License in California?
There are two separate renewal processes for the California Contractor License depending on the contractor’s license type:
- Sole Owners Without a Managing Employee – Can complete their renewal application online here
- All Other Licenses – Can renew their license online here, but will need to mail all renewal paperwork and payment receipts to the following address:
Contractors State License Board
9821 Business Park Drive
Sacramento, CA 95827
There is a $450 renewal fee ($470 for C-10 contractors) that must be paid when renewing the contractor license. Contractors who submit their renewal after the license expiration date will need to pay a $675 renewal fee ($695 for C-10 contractors).
The license is valid for two years from the date of issuance and must be renewed before the expiration date. Contractors can reactivate expired licenses within a period of 5 years from expiration. Anything beyond that 5 year period will require a new application.
What Are the Insurance Requirements for the California Contractor License?
California requires all contractors who have employees to obtain worker’s compensation insurance. Contractors whose business entity is an LLC will need to purchase general liability insurance with limits between $1 – 5 million (see our LLC bond page to learn more about this insurance requirement).
How Do California Contractors File Their Bond With The California CSLB?
Most surety companies will file the bond electronically with the CSLB on behalf of the contractor. When completing the bond form, the surety company should include the following information:
- Legal name, license number, and address of entity/individual(s) buying the bond
- Premium on the bond
- Surety company’s name, address, and phone number
- Bond amount
- Date the bond goes into effect
After the bond has been filed, contractors can check their license and bond status on the CSLB website.
How Can Contractors Avoid Bond Claims in California?
To avoid claims on the Contractor License Bond, contractors must follow all license regulations in the state. Below are some important issues that tend to cause claims:
- Repair any and all damages caused to homeowners’ property
- Do not abandon a job
- Complete work on time and per the contract specifications
- Do not engage, or allow representatives of the business to engage, in any acts of fraud
- Pay all vendors, suppliers, and subcontractors
- Pay all employee wages
What Other Insurance Products Can Agents Offer Contractors in California?
California requires all contractors with employees to obtain worker’s compensation insurance and LLC owners to obtain liability insurance. Bonds are our only business at BondExchange, so we do not issue any form of insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.