What is a Tennessee Contractor License Bond?
Tennessee licensed contractors may be required to post a surety bond in order to comply with local or state licensing requirements. A Tennessee contractor license bond ensures that contractors will work ethically and according to current building codes. Employees and customers of a contractor have the ability to make a claim for financial losses against a bond if fraudulent and illegal activities take place.
Similar to other license bonds, a Tennessee contractor license bond is a three-party contract. The principal is required to post a bond, while the obligee requires a bond to be obtained. The surety company provides the bond to the principal, and pays claims on the contractor’s behalf. Any valid claims, however, are repaid by the licensed contractors over time.
Do I Need to Get a Tennessee Contractor License Bond?
For local licensing authorities, a Tennessee contractor license bond may be required for a variety of contracting work. Plumbers, electricians, mechanical contractors, and HVAC contractors may be required to secure a bond in order to fulfill licensing requirements. When a state license is necessary, the following contractors need to also post a Tennessee contractor license bond:
- Building contractors
- Electrical contractors
- Heavy construction contractors
- Roadway contractors
- Masonry contractors
- Specialty contractors
Tennessee Contractor License Bond Obligee Information
Not all contractors who are required to have a state license need a bond. However, many local jurisdictions in the state require a Tennessee contractor license bond to be in place. When these local licensing requirements are imposed, the bond’s obligee is the local licensing authority in change of enforcement.
On a state level, a Tennessee contractor license bond is required for certain contractors who plan to bid and work on projects above a certain dollar amount. When this type of bond is needed, the obligee is the Tennessee Department of Commerce and Insurance. The department contact information is as follows:
500 James Robertson Parkway
Nashville, Tennessee 37243
What Does a Tennessee Contractor License Bond Cost?
Several factors play a role in determining the cost of a Tennessee contractor license bond. The first is the bond amount required by the state or local licensing authority. This amount can range from $10,000 to $25,000. However, contractors do not have to pay the full bond requirement. Instead, Tennessee contractor license bond costs are calculated as a percentage of the bond total, usually between 1 and 5% of the bond requirement.
The percentage you pay for a Tennessee contractor license bond also depends on your financial track record. The surety company issuing your bond evaluates your credit score and history to see if you a low or high risk for future bond claims. High-risk contractors who have a low credit score or adverse credit history may pay between 5 and 10% of the bond total.
How Do I Get a Tennessee Contractor License Bond?
You can start the process of securing your Tennessee contractor license bond by filling out a short application online. After reviewing your credit history and score, as well as other application details, the surety company provides you with a quote for your bond premium.
Expiration Date for Tennessee Contractor License Bonds
There is no set expiration date for Tennessee contractor license bonds because contractor licenses vary from one jurisdiction to the next. On a state level, however, licenses are issued for two-year terms, with an expiration date 24 months after the initial license is issued. The Tennessee contractor license bond has the same date of renewal. Your surety company provides instructions on how to renew the bond so you remain in compliance with licensing regulations.