What is a Texas Contractor License Bond?
Construction contractors working in Texas may be required to secure a license in order to work on residential or commercial projects in the state. While this is not a statewide requirement, many local jurisdictions make it mandatory for contractors to go through the licensing process. This often involves posting a surety bond, known as a Texas contractor license bond.
A Texas contractor license bond is a form of protection meant to safeguard the local licensing authority and a contractor's customers from work that is not performed in line with building codes. These surety bonds also ensure contractors pay all taxes due in a timely fashion, and they provide for coverage of financial losses to those harmed if work is not performed correctly.
Who Needs a Texas Contractor License Bond?
Not all contractors are required to get a license or a bond in the state of Texas. Each city or county determines who must have a Texas contractor license bond and in what amount. Several counties and cities mandate that building and roofing contractors have a bond in place, while others require landscape and irrigation, moving, water treatment, or swimming pool contractors to post a bond.
Check with your local licensing authority or agency to understand if and when a license is needed as a contractor and if a Texas contractor license bond is necessary as part of that process.
Texas Contractor License Bond Obligee Details
Surety bonds like a Texas contractor license bond represent a contractual agreement between the contractor, also known as the principal of the bond, the surety company providing the bond on behalf of the contractor, and the licensing authority requiring the bond to be in place. The local licensing authority is known as the obligee of the bond.
Because there is no statewide requirement for getting a Texas contractor license bond, the obligee of the bond is the licensing authority in a contractor's city or county.
How Much Does a Texas Contractor License Bond Cost?
The cost of a Texas contractor license bond varies depending on the amount of the bond and the risk the surety company takes on in issuing a bond. When it comes to the amount of the bond, this can vary significantly from one city or county to the next. For example, Abilene building contractors are required to secure a bond of $25,000, while a Beaumont roofing contractor only has a $15,000 bond requirement.
However, no matter the total amount of the bond, contractors are not on the hook for paying the full amount. A bond premium, calculated as a percentage of the total bond amount, is what contractors pay for their Texas contractor license bond. This price is a percentage of the bond total, ranging from 1 to 10%. Because the surety company takes on some risk with issuing a bond, a credit check is often required. A bad credit history and score leads to a higher bond premium.
How do You Get a Texas Contractor License Bond?
The process for getting a Texas contractor license bond is simple. You can start by submitting a brief quote request online to see how much your bond will cost. Once it is in place and the bond premium is paid, be sure to pay attention to the renewal timeframe to ensure you remain compliant with your contractor's license.