Don’t Get Tricked By Worthless Contractor License Bonds

Find out how getting your contractor license bond from the wrong surety company can waste your money and hurt your business.

The Wrong Surety Can Cost You Hundreds

Sureties companies that write contractor license bonds must meet certain requirements to do so. First, the surety company that provides you a surety bond must be licensed in the state where you will operate your business. In addition, obligees often have financial strength grade requirements that surety companies must meet (ratings are provided by rating companies such as A.M. Best) to make sure they have the financial strength to back your surety bond.

If you get your contractor license bond from a surety company who isn’t licensed in your state, gets financially downgraded or goes bankrupt, your bond will become worthless because it will be rejected by the obligee, forcing you to buy a new surety bond to keep your license. Unfortunately, you would not be refunded for a rejected surety bond because surety bond premiums are “fully earned”.

Choose the Right Surety Company

Low Bond Rates Won’t Always Save You Money

Not all surety companies have the financial stability to be writing the contractor license bonds that you need. Currently, the surety industry is in a “soft market”, which means there are surety companies out there writing surety bonds at very low rates for just about any contract that applies. Keep in mind, the surety bond is a form of credit provided to you by the surety company that guarantees you will pay bond claims caused by breaking the law or conducting your business unprofessionally.

If surety bonds are provided to contractors who aren’t financially strong or responsible enough to pay potential bond claims, surety companies would be forced to pursue those contractors legally, costing the sureties thousands of dollars per case. As a result, surety experts predict that many of these surety companies will experience massive losses, which is often followed by bankruptcy and closure. This would force any contractors who had their bonds with the surety companies in question to pay for new ones with different surety companies.

Experienced Bond Agencies Will Find the Right Surety for You

Finding a veteran bond agency can be even more vital to your business than finding the right surety company. An experienced bond agency like ours has numerous surety company partners, and will make sure to pair you with a surety company that not only provides affordable bond prices, but one that will be in business for the long haul. Read our article to find out how you can cut your contractor license bond costs in half.


Eric is an industry expert that specializes in taking complex surety concepts and explaining them in terms that make sense to the general public. He also manages the JW Surety Bonds website and works with various partners to help further educate the public on suretyship using various mediums.

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