Maryland Contractor License Bond

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What is a Maryland Contractor License Bond?

Many states require construction contractors to have a license to work. In Maryland, construction contractors must become licensed if they plan to work on home improvement projects and with that license comes the need to post a Maryland contractor license bond.

A Maryland contractor license bond is a type of surety bond meant to protect the customers of Maryland contractors. This bond provides some assurance to residents of the state that licensed contractors will work in line with current codes and regulations.

Should a contractor fail to abide by the law, then a claim can be made against a Maryland contractor license bond to help offset financial losses.

How Does a Maryland Contractor License Bond Work?

As a surety bond, a Maryland contractor license bond is a three-party contract.

The Obligee

The local or state licensing authority acts as the obligee of the bond, or the organization requiring a bond to be in place. In this case, the Maryland Home Improvement Guaranty Fund is the obligee.

The Principal

The licensed contractor is known as the principal of the bond, or the person responsible for posting the bond.

The Surety

The surety company provides the bond on behalf of the contractor.

Maryland Contractor License Bond Obligee Details

Local licensing authorities are the listed obligee of a Maryland contractor license bond for specialty contractors. For state bonding requirements, the Maryland Home Improvement Guaranty Fund is the obligee.

Who Needs a Maryland Contractor License Bond?

Home improvement contractors are required to have a license and a Maryland contractor license bond if they wish to work on residential projects in the state.

Some specialty contractors working in Maryland may also need a contractor license bond based on local licensing guidelines. Plumbers, HVAC professionals, and electricians must have appropriate licensing and meet bond requirements to comply with local laws.

For the state requirement imposed on home improvement contractors, individuals who cannot show a positive net worth of at least $20,000 must secure a Maryland contractor license bond.

How do You Get a Maryland Contractor License Bond?

To start the process of getting a Maryland contractor license bond, contractors can provide details about the bond type and amount they need online. The surety company reviews this information along with credit history to determine the premium due. After payment, the bond is in place until it renews, one to two years after it is issued.

How Much Does a Maryland Contractor License Bond Cost?

A contractor license bond, similar to other surety bonds, may vary in terms of the amount required by state or local authorities. The amount of the bond plays a part in how much the bond costs to put in place. For example, a Maryland contractor license bond for home improvement contractors working in the state must be at least $20,000.

The contractor pays a percentage of the total bond amount, which the surety company calculates based on a number of factors like credit history and financial background. The bond premium percentage typically falls between 1 and 10 percent of the bond required.

Can I Get a Maryland Contractor License Bond with Bad Credit?

Because the surety company takes on risk when issuing a bond, a contractor's credit history is evaluated at the time of application. It is possible to obtain a Maryland contractor license bond with bad credit, but individuals with lackluster credit or a bad credit history will pay a higher bond premium.

How Do I Renew My Maryland Contractor License Bond?

Contractor license bonds in Maryland must be renewed every two years. It’s important to submit your renewal application well in advance of your bond’s expiration date so that you don’t risk any period of time where your bond is invalid. Having an inactive license could result in excessive fees.

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Frequently Asked Questions

How much does a bond cost?

Pricing is a percentage of the contractor license bond amount that’s required of you, which is based on your personal credit. Use our bond pricing tool to to get a quick ballpark estimate.

Can I get bonded with bad credit?

Yes. You can apply and get bonded with bad credit. Our agency is the largest writer of bonds in the county, which allows us to approve contractors for bonds when other agencies cannot.

Are these the same as contract bonds?

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.

Do I need a state or local bond?

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.

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