What is an Iowa Contractor License Bond?
A contractor working in Iowa may be required to have a license before beginning work with a customer. As part of the licensing requirements, an Iowa contractor license bond may be necessary, depending on the city or municipality overseeing licensing requirements. An Iowa contractor license bond is not insurance for the contractor but instead, works as a safeguard for the contractor’s customers in the event they experience losses due to fraudulent or illegal activities.
An Iowa contractor license bond is a type of surety bond that involves three parties. The principal, which is the licensed contractor, obtains the bond, while the obligee, the state or local authority in charge of licensing, requires a bond to be posted. A surety company provides the bond to the principal and pays claims on their behalf. Any successful claims that result in compensation are repaid by the contractor who holds the bond.
What Does an Iowa Contractor License Bond Cost?
In Iowa, licensed contractors are required to post a bond between $5,000 and $25,000. Fortunately, the price you pay for an Iowa contractor license bond is not the full amount. The surety company prices contractor bonds as a percentage of the bond requirement, ranging from 1 to 10% in most cases.
The percent you pay for your bond, known as the bond premium, is determined by your personal credit score. Contractors with a score below 599 may be deemed a higher risk to the surety company. To help offset this risk, the cost of an Iowa contractor bond is higher than it would be for someone with a high credit score.
How Do I Get an Iowa Contractor License Bond?
You can start the process of obtaining an Iowa contractor license bond by submitting a short application form and quote request online. Once your business details and credit score are reviewed, the surety company will provide your bond quote and the steps you need to follow in order to post your bond.