What is a Florida Contractor License Bond?
Contractors in Florida may be required to have a license to do business with residential or commercial customers when working in the state. The licensing requirements may also include obtaining a Florida contractor license bond which is a type of surety bond. A Florida contractor license bond provides protection to customers of licensed contractors to help prevent fraudulent and illegal practices when working on a project. Should a customer suffer financial losses in the process, a claim can be made against the bond for compensation.
A Florida contractor license bond works like other surety bonds as a three-party contract. The licensed contractor is the principal, while the obligee is the local municipality requiring the bond to be posted. The surety company provides the bond to the principal, and pays for claims when they arise. However, the contractor required to repay the claim amount if found to be valid.
What Does a Florida Contractor License Bond Cost?
The bond amount a licensed contractor needs varies depending on the type of work he or she will perform. Division I contractors must post a $20,000 bond, while Division II contractors need either a $10,000 or $5,000 bond. However, you do not pay the entire amount of the Florida licensed contract bond. Bond premiums, or the cost of the bond, are calculated as a percentage of the total, often ranging from 1 to 10%.
The bond premium you pay depends on a few factors, including your personal credit score and business financial strength. A high credit score means you will pay between 1 and 3% of the bond total, while a low score requires you to pay a higher premium.
How Do I Get a Florida Contractor License Bond?
Getting a Florida contractor license bond starts with a brief application submitted online. Once the surety company has an opportunity to review your application details, you are provided a quote for your bond premium and guidance on how to finalize the process.