Arizona Contractor License Bond Explained
Contractor license bonds are a type of surety bonds required from some Arizona contractors before they can get licensed. Their purpose is to safeguard the interests of customers, and ensure that applicable laws and regulations are upheld.
More specifically, the contractor license bond ensures that you will follow the provisions outlined in Chapter 10 of the Arizona Revised Statutes. Failure to do so can result in a claim against your bond. All valid claims must be reimbursed up to the total value of the bond posted.
If this is the first time you’re reading about surety bonds, we advise you to learn more on our What is a Surety Bond? page.
You can begin your online application process now. Keep reading to find some more useful information about contractor license bonds in Arizona, such as how to calculate your costs, and how to apply if you have bad credit.
If you have any questions, don’t hesitate to call us at (877) 514-5146.
Questions about Contractor License Bonds
Who needs to post an Arizona contractor license bond?
The bonding requirement applies to many different types of contractors. It’s best to contact the Arizona Registrar of Contractor to see if you need one or not.
In general, both residential and commercial contractors need a bond. If you work in both areas, you will have to obtain two separate licenses, which means two separate contractor license bonds as well.
How much does an Arizona contractor license bond cost?
Your bond cost depends on several different factors. First of all, it’s important to know the total value of the bond you are required to post. The total value refers to the maximum protection the bond offers to potential claimants.
For commercial contractors and residential contractors alike, the total values most often depend on their annual volume of work. So, for a small contractor, the bond can be as little as $2,500, while larger contractors can be required to post bonds up to $100,000.
Once you know the total value of your bond, you can get a rough estimate of the premium you will be required to pay. Premiums are determined by the surety underwriter after a thorough analysis of your credit report and financials. Applicants with good credit may pay as little as 0.75% of the total value of the bond.
|Type of License||Contemplated annual gross volume||Surety Bond Amount||Above 700||Between 650-699||Between 600-649||Below 599|
|Residential General Contractor||Less than $750,000||$9,000||$100 - $135||$100 - $225||$225 - $450||$450 - $900|
|More than $750,000||$15,000||$112,5 - $225||$150 - $375||$150 - $375||$750 - $1,500|
|Residential Specialty Contractors||Less than $375,000||$4,250||$100||$100||$106 - $212,5||$212,5 - $425|
|More than $375,000||$7,500||$100 - $112,5||$100 - $187,5||$187,5-$375||$375-$750|
|Commercial General Contractors & General Engineering Contractors||$150,000 or less||$5,000||$100||$100 - $125||$125-$250||$250-$500|
|More $150,000 but less than $500,000||$15,000||$112,5 - $225||$150 - $375||$375-$750||$750-$1,500|
|More than $500,000 but less than $1 million||$25,000||$187,5 - $375||$250 - $625||$625-$1,250||$1,250-$2,500|
|More than $1 million but less than $5 million||$50,000||$375 - $750||$500 - $1,250||$1,250-$2,500||$2,500-$5,000|
|More than $5 million but less than $10 million||$75,000||$562,5 - $1,125||$750 - $1,875||$1,875-$3,750||$3,750-$75,000|
|$10 million or more||$100,000||$750 - $1,500||$1,000 - $2,500||$2,500-$5,000||$5,000-$10,000|
|Commercial Specialty Contractors||$150,000 or less||$2,500||$100||$100||$100-$125||$125-$250|
|More than $150,000 but less than $500,000||$7,000||$100||$100 - $175||$175-$350||$350-$700|
|More than $500,000 but less than $1 million||$17,500||$130 - $262,5||$175 - $437,5||$437,5-$875||$870-$1,750|
|More than $1 million but less than $5 million||$25,000||$187,5 - $375||$250 - $626||$625-$1,250||$1,250-$25,00|
|More than $5 million but less than $10 million||$37,500||$281 - $562,5||$375 - $937,5||$937,5-$1,875||$1,875-$3,750|
|$10 million or more||$50,000||$375 - $750||$500 - $1,250||$1,250-$2,500||$2,500-$5,00|
Keep in mind that these premiums are only estimates based on your credit score alone. Read our What Does a Surety Bond Cost? page for a more detailed explanation of bonding cost, as well as some useful cost-saving tips.
Can I get an Arizona contractor license bond with bad credit?
Spots on your credit report, as well as a low credit score make you a high-risk applicant. As you can see from the table, bonding premiums can go up to 10% for applicants with bad credit.
We have created our bad credit surety bonds program to make the bonding process easier for applicants struggling with their credit. Our surety bond experts can also help you build a stronger application, so you get the lowest possible rate.
How do I apply for an Arizona contractor license bond?
Applying for your surety bond is a very straightforward process, especially thanks to our fast and secure online application. After you submit it, one of our agents will contact you with a bond quote.
After submitting all necessary documentation and paying your bond quote, we do our best to reduce processing times. We will send you the original bond form via mail.
How to become a contractor in Arizona
Becoming a contractor requires submitting an application to the Arizona Registrar of Contractors. Depending on the exact type of license you need to obtain, requirements vary, so be sure to check their website for the latest information.
Normally, contractors need to pass an exam showing knowledge in certain areas of construction, submit copies of a background check, submit financial statements and pay applicable fees.
What happens if there is a claim against my contractor license bond?
Surety bond claims are something to avoid at all costs. If you are in a dispute with a client over something, you should do your best to negotiate it out of court. Claims can be costly and time-consuming.
If going to court cannot be avoided, you should contact your bonding company and tell them what happened. If the claim is not solid and the surety believes you didn’t break the rules, they can help you build a strong case and win the claim in court.