A contractor license bond is a surety bond that California requires before the Contractors State License Board will issue, reactivate or renew an active license. The contractor bond amount has been $25,000 since January 1, 2023. The bond protects consumers and workers, not the contractor, and the surety can seek repayment from the contractor for any claim it pays.
What it usually covers
- A financial guarantee to the state that the contractor will follow license law
- Payment to eligible consumers, workers or others harmed by certain license law violations, up to the bond amount
- The contractor bond required for an active CSLB license
- A bond of qualifying individual when a license is qualified by a responsible managing employee
- An additional employee and worker bond for licenses held by limited liability companies
What it usually leaves out
- Protection for the contractor, since the surety can recover what it pays from the contractor
- Injury or property damage claims, which belong under general liability
- Employee injuries, which belong under workers’ compensation
- Losses above the bond amount
- Performance and payment guarantees on specific projects, which need separate contract bonds
Who typically needs it
- Every California contractor holding an active CSLB license
- Corporations and limited liability companies qualified by a responsible managing employee or officer
- Limited liability companies holding a contractor license
- Contractors bidding public or private work that requires bid, performance or payment bonds
What shapes the price
- 01Bond type and amount
- 02Personal and business credit of the owners
- 03Years in business and license history
- 04Financial statements for larger or project specific bonds
- 05Prior bond claims or license discipline
How limits and terms work
A surety bond has three parties. The contractor is the principal, the state or project owner is the obligee and the surety guarantees the obligation.
Most sureties ask the owners to sign an indemnity agreement, so a paid claim usually becomes a debt the contractor must repay.
License bonds must be written by a surety admitted through the California Department of Insurance and kept continuously in force, or the license can be suspended.
Questions to ask before you buy
- Which CSLB bonds does our license type and entity structure require
- Who will sign the indemnity agreement
- When does the bond renew and how will CSLB be notified
- Will upcoming projects require bid, performance or payment bonds
Surety and contractor license bonds questions, answered
How much is the California contractor license bond?
The Contractors State License Board requires a $25,000 contractor bond, an amount in effect since January 1, 2023. A license qualified by a responsible managing employee may also need a $25,000 bond of qualifying individual, and limited liability companies need a separate worker bond. Confirm current amounts on cslb.ca.gov before you buy.
Is a contractor license bond the same as insurance?
No. A bond guarantees your obligations to the state, consumers and workers. If the surety pays a valid claim, it can seek repayment from you, usually under an indemnity agreement you signed. Insurance pays covered losses on your behalf. Most contractors need both a bond and liability insurance.
General information only. Coverage, limits and exclusions depend on the policy an insurer issues and the state where you operate.