Texas Contractor License Surety Bonds
Who needs a surety bond for a Texas contractor license?
Many states require contractors to post a surety bond with the state licensing board as a requirement to get a contractor license. However, this surety bond licensing requirement varies by municipalities in the state of Texas. Additionally, the necessary bond amount and fine print on the bond form in each county, city and town you plan to work contract jobs may differ. Regardless of these details, the surety bond requirement serves the same purpose of protecting your clients.
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We recommend verifying the bond type and amount you require with your local licensing department. They will often provide a copy of the bond form to ensure you get the bond amount you need with your surety of choice. If you don’t see the bond type you need on our website, please contact us at [email protected] or call (866) 722-9239.
I need a bond for a construction project
A Contractor License Bond does not fulfil the Contract Bond requirement for a construction project. If you are working on a construction project that requires a bond, you likely need a Payment Bond, Performance Bond, Bid Bond or another type of Contract Bond. Please visit our Contract Bond page here for more information on these bond types.
How does a Texas Contractor License Surety Bond work?
A surety bond is a three-party contract between the following entities.
Obligee– The licensing authority requiring you to get a bond.
Principal – You, the contractor seeking to get your license.
Surety – The surety company is the entity providing the line of credit.
Unlike traditional insurance where the policy is to your benefit, a surety bond functions as a mix of insurance and a line of credit. The obligee accepts your surety bond as your guarantee you’ll perform your responsibilities as a contractor ethically and by the law. Failure to hold up your end of the agreement could result in a client filing a claim against your bond.
What happens if a claim is made?
The surety company and you don’t expect to deal with a bond claim. However, they do happen as not every contractor upholds the rules and regulations they agree to with the obligee. If a claim is made against your bond, the surety will investigate the claim to determine if it’s valid. A payout of up to the full bond amount to the claimant only occurs if the validity of the claim is proven to the surety. As the principal of the bond, you are responsible to pay the surety company back in full after a claim payout.
How much does the surety bond cost?
The cost of your bond greatly varies as the surety has to assess the risk involved. One of the risk factors in determining the cost is your personal credit. By having good credit, you’re likely to pay a lower premium for your bond. The other risk factor is the bond amount the licensing authority requires of you. Depending on the area you work and the type of work you perform, the necessary bond amount ranges from $1,000 to $100,000+. Fortunately, the bond amount is not the same as the cost of the bond. With good credit, your premium should fall between 1% to 5% of the bond amount.
Can I get bonded with bad credit?
Yes, you can still get bonded with bad credit. However, the surety is taking on additional risk if your credit is bad. Upon approval for a quote, your premium could be in the higher range of 5% to 15% of the bond amount. Additionally, when we pull credit, it’s a soft pull. Meaning, your credit score is not adversely effected when you submit an application.
Where can I get a bond for my contractor license?
Get your Texas Contractor License Surety Bond by submitting our quick and easy online application. Once you receive your quotes, you can purchase your bond online to submit to the licensing authority. Our team of surety experts are available to assist you with your questions about the bond or your quotes. Simply send us a message here or email [email protected].
Additional Resources
Everything you need to know about becoming a licensed contractor.
Check out the answers to our frequently asked questions.
Find the specific steps needed to get a contractor license in your state.
Looking for another type of bond?
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