What Is a Minnesota Contractor License Bond?
Construction contractors in various cities and counties in Minnesota must hold a valid license to perform work legally. Part of the licensing process involves posting a Minnesota contractor license bond.
While there is not a state requirement for all construction contractors, securing a contractor license bond is required by several local jurisdictions. This type of surety bond protects the customers and suppliers of construction contractors, not the contractor themself.
When work is not done properly or is not completed, a claim can be made against a Minnesota contractor license bond to help cover financial losses.
How Does a Minnesota Contractor License Bond Work?
Surety bonds represent a contractual agreement between three parties: the obligee, the principal, and the surety.
The obligee is the licensing authority mandating a bond be in place.
The principal is the contractor responsible for getting a bond so that they can legally work in the state.
The surety company provides the bond to the contractor and initially pays any claims against the bond. The contractor then repays the claims over time.
Minnesota Contractor License Bond Obligee Details
The obligee for a Minnesota contractor license bond varies depending on where the contractor works.
For example, licensed contractors working in the city of Minneapolis who are required to post a bond do so with the Licenses and Consumer Services Division of the Minneapolis Community Planning and Economic Development Department as the obligee.
Who Needs a Minnesota Contractor License Bond?
In the state of Minnesota, many types of construction contractors must secure a contractor license bond, including any contractor working in Brainerd county.
Specialty contractors working throughout the state may also need to get a Minnesota contractor license bond, including those who perform work in the categories of water conditioning, sewage treatment, sign installation, residential roofing, plumbing, or electrical contracting.
It’s essential to check with your local jurisdiction to determine which Minnesota contractor license bond is necessary based on the projects you plan to complete.
How Do You Get a Minnesota Contractor License Bond?
Getting a Minnesota contractor license bond is a relatively easy process. You can start by submitting a bond quote request online, providing information about the type of bond you need and the amount. The surety company provides a bond quote and instructions on how to complete the process.
How Much Does a Minnesota Contractor License Bond Cost?
A Minnesota contractor license bond varies in price based on the amount of the bond and the credit history of the contractor. The total amount of the bond that must be in place is dictated by the type of contractor license held and the location in which the contractor plans to work.
A residential roofing contractor working in the state must have a bond of at least $15,000, while an electrical or elevator contractor must have at least a $25,000 bond. Contractors only pay a fraction of the total bond requirement, which is calculated as a percentage of the bond total, typically ranging from 1 to 10 percent.
Can I Get a Minnesota Contractor License Bond with Bad Credit?
Bond prices also depend on the credit history of the contractor. You can obtain a contractor license bond with bad credit, but those with strong credit will pay a lower percentage cost than those with poor credit.
How Do I Renew My Minnesota Contractor License Bond?
Minnesota contractor license bonds may need to be renewed on an annual basis to remain compliant with local and state regulations. When your bond is due for renewal, you should receive a reminder.