Alabama Contractors License Bond
- Required by various cities in the state of Alabama
- Mandatory to obtain a city or county contractors license
- Protects the state and the public from contractor misconduct
- Provides financial compensation for claims against the bond
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How much does an Alabama contractors license bond cost?
The Alabama contractors license bond is not a statewide requirement for contractors. Various counties and cities across the state have a surety bond licensing requirement for contractors which varies in its amount.
Cities that require an Alabama contractors license bond are Dothan, Florence, Mountain Brook, Auburn, Opelika, Wetumpka and others. Bond amounts for the different types of contractors in these cities vary between $2,500 and $10,000, though they are typically around $5,000.
Alabama HVAC and refrigeration contractors are required to obtain a $15,000 contractor license bond when applying for a license. This requirement is valid for the entire state.
Once you apply for your bond, the surety company that issues the bond will provide you with a quote, which you will need to pay to obtain the bond. Your quote, or premium, is a small fraction of your bond’s total amount. For example, if you’re getting a $10,000 Alabama contractors license bond and are offered a 1.5% quote, you’ll need to pay $150 to obtain your bond.
The exact cost of your bond is determined by surety bond companies when they review your application and your personal financial indicators such as your credit score, your financial statements and your assets. Personal credit score is the most important factor, though, and applicants with high scores (those of 700 FICO and above) are usually offered a quote that is between 1% and 3% of the total bond amount.
Options for applicants with bad credit
Applicants with low or nonexistent credit scores are sometimes turned away by sureties. But with our Bad Credit Program, even if you have a low credit score you can still get bonded just as easily as applicants with better scores.
Our program enables such applicants to get their licensing bond, though at a slightly higher rate, and keep working. Rates under this program are determined on an individual basis, but are usually between 3% and 10% of the total bond amount.
By obtaining a bond, applicants can get licensed and work on their financials so as to improve their bond rate over time. We’re dedicated to assisting bad credit applicants in doing business and improving their finances.
What is the purpose of this bond?
Contractor license bonds are typically required by states’ or counties’ contractor licensing boards when issuing licenses. These bonds are a form of protection to the state or county as well as the public. They secure financial compensation to those parties if a licensed and bonded contractor violates state statutes or the surety bond agreement’s conditions.
In the case of the Alabama contractors license bond, it is an agreement between the bonded contractor, the local Alabama city or county licensing board requiring the bond and the bond company that issues the bond. Apart from issuing the bond, the company also backs it financially. If the contractor complies with all state regulations and the surety bond agreement, the contractor must only pay the small initial cost to obtain the bond.
If the contractor does violate the agreement and a claim is made by one of the concerned parties against their bond, the surety must investigate the claim. If the claim is legitimate, the surety will compensate claimants up to the full amount of the surety bond. The licensed Alabama contractor is then required to fully compensate the surety for stepping in and resolving the claim.
Common causes for a claim against an Alabama contractors license bond are triggered by contractors:
- Violating the state code
- Acting dishonestly, not performing according to the conditions of their contract and causing losses or harm
- Failing to pay obligations or taxes
How to apply for an Alabama contractor license
Alabama contractors license requirements vary from county to county. You can expect to be required to complete some of the following requirements upon applying:
- Provide proof of previous experience
- Pass a contractor license examination or complete a pre-license education course
- Obtain insurance such as a general liability insurance
- Submit a copy of criminal background check
- Obtain an Alabama contractors licensing bond
- Pay an application and/or licensing fee
Because of the differences in licensing requirements between different counties, you should make sure to check with your local licensing institution for a more detailed checklist of what you are required to do.
If you need more information regarding your surety bond or the bonding requirements, call our surety professionals at (866)-450-3412 anytime!