Frequently Asked Questions

1. What is a Contractor's License Bond?
2. What is a Bond of Qualifying Individual?
3. Is it true that the amounts of the Contractor's License Bond and Bond of Qualifying Individual are scheduled to increase?
4. How do I apply for a Contractor's License Bond?
5. Can I renew my existing Contractor's License Bond by telephone?
6. What happens if I do not renew my Contractor's License Bond by the expiration date?
7. I am changing my business from a sole ownership to a corporation. Will my Contractor's License Bond transfer?
8. Why do most bonding companies check my personal credit history?
9. What is a Contract Bond: Bid/Performance/Payment Bond?
10. How do I apply for a Contract Bond?
11. What is Comprehensive General Liability?
12. How can I obtain a quote for a General Liability policy?
13. How long will it take to receive a quote once you receive my questionnaire?
14. How much will General Liability cost me?
15. Can I buy a policy for a "one-time project" that shouldn't last more than a month but requires that I have General Liability coverage?
16. How soon after you request binding of my policy am I able to get a Certificate of Insurance?
17. Am I required to have General Liability?
18. Will my General Liability policy automatically renew from year to year?
19. What other types of insurance do you offer?
20. If I don't have any employees do I need a Worker's Compensation policy?
21. What is an Additional Insured Certificate and why am I required to obtain it from my subcontractors?
22. Why are insurance policies audited?
23. What is the new Worker's Compensation requirement for Roofing Contractors (C-39)?
24. Will there be an additional premium when my bond is increased and how will your agency handle this?

1. What is a Contractor's License Bond?

The Contractors State License Board (CSLB) requires every actively licensed contractor to file a Contractor's License Bond or a bond alternative (e.g., cash deposit) in the amount of $10,000 with the Registrar of Contractors. A Contractor's License Bond is a type of surety bond because it is a contract where a surety (e.g., bonding company) promises the State of California that the contractor will comply with the Contractors License Law. The surety specifically agrees to pay claims made by homeowners, employees, and other eligible persons who suffer losses because of the contractor's violation of the Contractors License Law (e.g., abandons a construction project). It is very important to understand that the contractor is required to reimburse the surety for any expenses it incurs as a result of the contractor's violation.

2. What is a Bond of Qualifying Individual?

This is also known as an "RME" or "RMO" bond because it covers the responsible managing employee or responsible managing officer of a licensed sole proprietorship, partnership, or corporation. The RME or RMO bond is similar to a Contractor's License Bond in that the surety promises the State of California that the RME or RMO will comply with the Contractors License Law and agrees to pay claims made by homeowners, employees, and other eligible persons as a result of the RME's or RMO's violations.The amount of the RME or RMO bond is $7,500 until 12/31/06. Effective 01/01/07, the CSLB will require a bond in the amount of $12,500 for a Qualifying Individual (RME/RMO). Note that an RMO bond is not required for an RMO who owns 10% or more of the corporation's voting stock. Remember that the surety is entitled to reimbursement for any expenses it incurs on account of violations by an RME or RMO.

3. Is it true that the amounts of the Contractor's License Bond and Bond of Qualifying Individual are scheduled to increase?

Yes, the amounts of both bonds were increased to $12,500 on January 1, 2007.
Our clients did not need to buy a new bond because we arranged for a blanket rider to be filed with the Registrar of Contractors that automatically increases the amounts of our clients' bonds to $12,500. Depending on the bonding company, you may be charged a partial premium for the increase in bond amount.

4. How do I apply for a Contractor's License Bond?

We use a simple one-page application that you can complete in less than five minutes.
We will mail or fax you the application or you can download it from our Web site.
Payment may be by check or credit card: Visa, MasterCard, American Express, and Discover/Novus.

5. Can I renew my existing Contractor's License Bond by telephone?

Yes, just give us your credit card information when you call and we will renew your bond by phone, or you can make a payment online form our home page. We will mail you a copy of the bond renewal (continuation) letter that we sent to the Registrar of Contractors, a wallet-size card with your bond number, expiration date, and other info, and a copy of your credit card receipt.

6. What happens if I do not renew my Contractor's License Bond by the expiration date?

Your contractor's license is automatically suspended when your bond is cancelled because it was not renewed before the expiration date. We can get your contractor's license reinstated if you act within 90 days from the date of notice of bond cancellation. Call us as soon as you receive a notice of bond cancellation, so that we have enough time to do the paperwork and send the Registrar of Contractors a reinstatement (rescission of cancellation notice) letter within the 90-day period.

7. I am changing my business from a sole ownership to a corporation. Will my Contractor's License Bond transfer?

No. Whenever there is a change in business entity a new bond is required to transfer the license. If you have a bond for your current entity, you may be able to receive a partial refund after the license is transferred to the new entity.

8. Why do most bonding companies check my personal credit history?

The contractor is responsible for reimbursing the bonding company for any losses it incurs as a result the contractor's violation of the Contractors License Law; therefore, your personal credit history is of interest to the underwriter. This is usually not a problem for our clients because our primary bonding company accepts 90-95% of the Contractor's License Bond applications submitted. We can still get you a Contractor's License Bond if you have credit problems, but the premium will be higher. Our recommendation to anyone with credit problems is to buy a one-year bond at the higher premium and get a copy of your credit report. If you can resolve your credit problems during that year, we may be able to write your next bond with a bonding company that offers preferred (lower) premiums.

9. What is a Contract Bond: Bid/Performance/Payment Bond?

"Contract Bond" is the general term for surety bonds relating to bids, job completion, and payment of bills for labor and materials. These would include a Bid Bond (guarantees that the contractor who is awarded the bid will sign the contract based on his bid and qualify for a Performance Bond), a Performance Bond (guarantees job completion according to building plans and specifications), and a Payment Bond (guarantees that labor and material bills will be paid). Contract bonds are usually required for public projects and for many private projects.

10. How do I apply for a Contract Bond?

We offer quick and easy bond applications for jobs under $200,000. For larger jobs, the bonding companies require more extensive applications. Please call Vicky with any questions.

11. What is Comprehensive General Liability?

Comprehensive General Liability provides Liability coverage for bodily injury and property damage arising from accidents on premises, business operations in progress, products manufactured or sold, and completed operations. Bodily Injury includes sickness or disease and death in addition to accidental injuries (Bodily Injury coverage does not apply to the insured's employees. If a contractor has employees, he must carry Workers' Compensation insurance to protect them). Property Damage applies only to claims from damage to tangible property or loss of use of tangible property not damaged.

12. How can I obtain a quote for a General Liability policy?

You simply fill out our questionnaire and e-mail or fax it to our office. If the information in your questionnaire is complete and accurate, we can shop insurance companies for the best price.

13. How long will it take to receive a quote once you receive my questionnaire?

Our insurance companies offer competitive rates and receive a large number of applications each month. We can get you a quote within 24 to 48 hours after receiving your questionnaire unless the quote must come from another office, which could add two or three days.

14. How much will General Liability cost me?

The cost of General Liability varies from contractor to contractor depending on gross receipts, payroll, subcontract costs, and locations. If the contractor's questionnaire is completed and e-mailed or faxed to us, we will be able to accurately quote you.

15. Can I buy a policy for a "one-time project" that shouldn't last more than a month but requires that I have General Liability coverage?

At the present time, none of our insurance companies offers this type of policy. We offer policies that are written on an annual basis.

16. How soon after you request binding of my policy am I able to get a Certificate of Insurance?

Once we are in receipt of your confirmation letter from the underwriter and are supplied a policy number, we can request a Certificate of Insurance from the underwriter's office.

17. Am I required to have General Liability?

You are not required to carry General Liability insurance in the State of California; however, home improvement contractors must disclose to homeowners in writing whether or not they carry Commercial General Liability insurance. All contractors must answer honestly whether they carry Commercial General Liability insurance if asked by another contractor, or homeowner, or other potential customer.

18. Will my General Liability policy automatically renew from year to year?

Your General Liability policy will not renew automatically. With each new policy year a number of your working conditions may have changed as well as the program in which you were previously insured. We will review your renewal questionnaire and find the best policy for you.

19. What other types of insurance do you offer?

In addition to General Liability, we offer a number of insurance policies for contractors: Inland Marine (to cover your tools), Commercial Auto, Builders Risk (Course of Construction), Property, Workers' Compensation, Health Benefits, and Umbrella/Excess.

20. If I don't have any employees do I need a Workers' Compensation policy?

You can carry a Workers' Compensation policy if you do not have any employees but you are not required to do so. If you have employees, (other than your spouse if you are married), then you are required by the State of California to carry Workers' Compensation.
DOES NOT APPLY TO ROOFERS (C-39). SEE FAQ #23.

21. What is an Additional Insured Certificate and why am I required to obtain it from my subcontractors?

An Additional Insured Certificate is an endorsement to an individual or company that is added to the insured's policy for the period of time your work is being performed at their jobsite. Your subcontractors are required, by your carrier to name you as additionally insured onto their policy for your protection. If a claim were to arise from work your sub-contractor performed and they were not insured then your policy would cover any loss/claim that may transpire. Having your subcontractors name you as an additional insured on their policy ensures that they are insured with limits that are equal to or greater than your policy, and that any claims would be applied to their policy first and not yours.

22. Why are insurance policies audited?

Carriers, by law, have three years to audit an expired policy. An audit will survey the insured's records to determine if the figures that were given at the inception of the policy are the same or if additional premium is owed for increased gross receipts, payroll or subcontracting costs.

23. What is the new Workers' Compensation requirement for Roofing Contractors (C-39)?

Effective January 1, 2007, contractors with a C-39 (Roofing) license are required by law to carry Workers' Compensation insurance, regardless of whether or not they have employees. If you have a C-39 license, and your coverage is not in place by January 1, 2007, your license will be suspended. If you have a C-39 license with additional classifications, and you did not have Workers' Compensation in place by the deadline, the roofing classification would have been deleted from your license, but it will not be suspended. For further information regarding this new law, please contact the Contractor's State License Board.
If you hold any other class of license, you can carry a Workers' Compensation policy if you do not have any employees, but you are not required to do so. If you have employees (other than your spouse, if you are married), then you are required by the State of California to carry Workers' Compensation insurance.

24. Will there be an additional premium when my bond is increased and how will your agency handle this?

Yes, there will be an additional premium due to the increased bond amount. You will receive an invoice for the difference, which will be prorated based on how much time is left on your bond term. Invoices will be sent directly to all clients by the bond companies with instructions regarding payment. If you do not pay the additional premium, your bond may be cancelled.

NOTE

We hope these FAQ's were helpful. If you have a question that is not covered here or want more details, please call our office and ask for a bond or insurance specialist.