What Is an Alabama Contractor License Bond?
Alabama has no statewide licensing requirement for construction contractors, but every county or municipality can determine their own licensing process. In addition to contractor licensing, an Alabama contractor may need a contractor license bond.
Posting an Alabama contractor license bond can protect customers of a licensed contractor. If a project isn’t performed in line with local building codes or laws, then a customer can file a claim against the bond for compensation.
While the surety company initially pays for a bond claim, it is the contractor’s responsibility to repay the claim. Keeping Alabama contractor license bond claims to a minimum is important to maintain your contractor business in the state.
How Does an Alabama Contractor License Bond Work?
An Alabama contractor license bond is an agreement between three parties.
The first party is the local jurisdiction requiring the bond be posted by the contractor. This party is known as the obligee.
The second party is the contractor who must post the bond for the purpose of getting licensed, and this party is known as the principal.
The third party is the surety company that gives the bond to the contractor and pays for any claims that are successful. The contractor must then pay back the claims over time.
Obligee Information for an Alabama Contractor License Bond
Local jurisdictions (counties and cities) in Alabama act as the licensing and bonding authorities responsible for enforcement and guidelines. The department or division in charge of licensing also acts as the obligee for Alabama contractor license bonds.
General contractors that complete work valued at $50,000 or more each year may secure an Alabama contractor license bond instead of meeting the minimum net worth requirements.
The obligee for the statewide Alabama contractor license bond is the Alabama Licensing Board for General Contractors. The obligee contact information is as follows:
Licensing Board for General Contractors
2525 Fairlane Drive
Montgomery, Alabama 36116
Do You Need an Alabama Contractor License Bond?
Each jurisdiction that imposes licensing requirements on contractors in Alabama has specific guidelines for who must complete the licensing process. Alabama contractor license bond requirements are also dictated by local governments, so it’s important to check with the licensing authority where you plan to perform work as a contractor.
Contractors who work in the categories below may need to secure an Alabama contractor license bond:
- Heating and air conditioning
General contractors who do not meet the minimum net worth requirements and complete projects over $50,000 during the year must also secure an Alabama contractor license bond on the state level.
How Do I Get an Alabama Contractor License Bond?
Obtaining your Alabama contractor license bond is a simple process. You can submit a short form to request a quote and start an application online. You may receive approval quickly once your application details have been reviewed.
What Does an Alabama Contractor License Bond Cost?
Bond pricing depends on several factors, including the total bond amount required. An Alabama contractor license bond of $1,000 may be needed in one jurisdiction, while a bond of at least $25,000 may be required in another. Be sure to check with the local municipality to determine the bond amount you need.
Regardless of the bond required, licensed contractors do not need to pay the full amount to post a bond. A bond premium is calculated as a percentage of the total bond.
Can I Get an Alabama Contractor License Bond with Bad Credit?
Bond premiums can range from 1 to 10 percent, depending on your credit history and business financials. You can still get an Alabama contractor license bond with poor credit, but the bond premium you pay will be higher than for someone who has a healthy credit score.
Expiration Date and Renewal for Alabama Contractor License Bonds
Depending on the local authority in charge of licensing for your jurisdiction, the expiration date and renewal term for an Alabama contractor license will vary. An Alabama contractor license bond has the same expiration date as a license.
The surety company providing your Alabama contractor license bond will send details about the renewal process prior to its expiration date.
Frequently Asked Questions
No. Contractor license bonds ensure you will abide by the laws of your state, city or municipality when performing contracting work. Contract bonds guarantee public projects will be completed properly and are a separate bond type. You can learn more about contract surety bonds by visiting the contractor bond center.
It depends on who is requiring the bond of you, the local municipality, county or state. Depending on your location, it is possible you may need both a local and state bond, as contractor license bond requirements can vary drastically. You can select your state to see a full list of contractor license bond requirements.