Most states require electricians to get a license along with a surety bond prior to working in the state. The bond provides additional assurance that the contractor will comply with the state’s regulations, which are put in place to protect the public.
In this post, we will examine how an electrical contractor bond works including how much it costs and who requires a bond.
Who needs an electrical contractor bond?
An electrical contractor is defined as a person that designs, develops, tests, and installs electrical hardware and systems. Some states require electrical contractors to get an electrical contractor license before they can work on electrical projects.
For many of these states, part of the requirements for obtaining a license is to get a surety bond. States that require an electrical contractor bond will not allow electricians to get a license if they are not bonded.
Some of the states that require an electrical contractor bond include:
How do electrical contractor bonds work?
The bonds are a three-party agreement between the contractor (Principal), the state agency that requires the bond (Obligee), and the surety company. Their purpose is to protect both the state and the public from electricians who act dishonestly or violate their licensing regulations.
If an electrician violates the state’s licensing regulations, the state licensing agency and the electrical contractor’s customers can file a claim against the bond. In the event of a claim, the bonding company is responsible to investigate the validity of the claim.
If they find the claim to be valid, the surety will compensate the damaged party, up to the total amount of the bond. The electrician is ultimately responsible for any paid claims and must reimburse the surety company.
The exact conditions for a bond claim will vary from state to state but they generally apply to any damages, injuries, or losses that result from the electrician’s violations. Some examples of these can include:
- Material damages caused by malpractice or carelessness
- Not fixing defects or restoring work when required to do so
- Not paying employees on time
- Not paying business taxes
- Not paying suppliers for materials
How much does an electrical contractor bond cost?
The cost of an electrical contractor bond depends on your local bonding requirement and how your surety company chooses to underwrite the bond. Different states have varying requirements for the total value of their bonds. Below you can see the total bond amount for electrical contractor bonds in popular states:
- Arizona: $2,500 – $50,000 bond
- Illinois: $5,000 – $20,000 bond
- New Jersey: $1,000 bond
- North Carolina: $50,000 – $130,000 bond
- Minnesota: $25,000 bond
- Ohio: $5,000 – $25,000 bond
- Virginia: $1,000 bond
- Washington: $4,000 bond
When you go to get your electrical contractor bond, the surety company will determine your premium, the percentage of the total bond amount that you need to pay to get the bond. Premiums vary on an individual basis. The surety company evaluates your experience, financial and credit history as well as other factors to determine your premium rate.
How do you get an electrical contractor license?
If your state requires an electrical contractor license, you will need to complete the regulating agency’s application process. While the exact licensing requirements will vary between states, here are some common steps you should be prepared to take to get your electrical contractor license:
- Submit an electrician license application to the state regulatory body
- Pay application and licensing fees
- Provide supporting documentation
- Pass a knowledge examination verifying your competency
- Provide proof of workers’ compensation (electrical contracting companies)
Electrical contracting companies that conduct business in multiple states need to get a license in each of the states they seek to operate. There are some states that share reciprocal agreements to honor licenses from the other state.
Along with state licenses, some cities and counties have their own electrical contractor licenses that electricians need before they can work on projects. If you live in one of these areas, you will need to get multiple licenses.
Electrical contractor licenses are only valid for a specified amount of time, typically around a year. To renew their license, electricians need to complete their state’s renewal process. This will typically involve submitting another contractor license application and paying an annual license fee.