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.

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.

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.

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.

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.

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.

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.

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.