The three parties in a bond
The contractor buying the bond is the principal. The person or organization requiring the promise is the obligee. The surety is the company backing that promise. A valid claim is handled under the bond’s terms and applicable law.
Unlike many liability insurance arrangements, the surety can seek reimbursement from the contractor or others who signed an indemnity agreement after paying a claim. An indemnity agreement is a promise to repay specified costs. Read that obligation before signing.
California’s contractor license bond
CSLB requires a $25,000 contractor license bond. That is the bond’s stated amount, not a $25,000 payment you make to buy it and not $25,000 of general liability coverage for your business. The premium is the price charged for the bond.
The license bond protects specified beneficiaries under California’s contractor licensing rules. General liability instead addresses covered injury and property damage claims against your business. Contractors can need both. The bond’s business name and license information must match the licensing record.
Additional bonds for qualifiers and LLCs
A qualifying individual is the person whose qualifications support the contractor license. Depending on their role and ownership, a separate bond of qualifying individual may be required. Tell us who the qualifier is and how the business is organized.
A contractor LLC has a separate $100,000 employee/worker bond requirement in addition to the license bond, along with liability insurance requirements. These are distinct obligations. A single bond should not be assumed to satisfy every CSLB requirement.
Bid, performance and payment bonds
A bid bond backs specified obligations associated with a bid, such as entering the contract and supplying required bonds if awarded. A performance bond backs performance of the contract. A payment bond addresses specified payment obligations to parties such as subcontractors and suppliers.
A license bond does not replace these project bonds. The project owner may supply a required bond form. Send that form with the contract amount, bid deadline, schedule and description of the work so the request can be reviewed on the correct basis.
What the surety needs to make a decision
The review can include your experience, finances, credit, current projects and the new contract. Backlog means work you have already agreed to perform but have not yet completed; it helps show how much capacity is already committed.
Requirements vary with the type and size of bond. Start with the exact request and deadline, then we can explain which financial records or project details are needed and the quoted premium before you commit.
Common questions
The $25,000 figure is the required license bond amount. You pay a quoted premium, which is priced separately. A claim can also create a reimbursement obligation under the surety agreement, so the premium is not the only obligation to understand.