Top 7 reasons why a contractor should carry a license bond in California.
May 21, 2019
If you are a contractor working in California, carrying a license bond is of the essence.
If you are new to license bond, here is a quick definition: A license bond is a type of surety bond that is legally binding, and taken to protect your clients.
In this article, we are going to look at the top 7 reasons why you, as a contractor, should make a habit of carrying a contractor bond when in CA.
1. You Need One to Take a Construction Project
If you are in CA, you will need more than just a license or insurance to take on a construction project.
You will also need a license bond.
There are various types of license bonds, with each type covering different potential issues ranging from performance, licensing, bid, paying workers, and more.
Whatever clause it covers or whatever type of license bond you choose to take, it’s a sign of sincere intention to your client.
And by taking the bond, it shows your client that you are ready to uphold the promise of fulfilling the duties they entrusted you with.
2. It Shows You’re Licensed
Having a license bond for California Contractors is proof of licensing.
In particular, if you are in the construction domain, you will need a surety bond for your company to be properly licensed.
If you are in California, you are prohibited from working legally without a license.
Regardless of how good your track record is, lack of a license bond might be your downfall.
A CCLB assures your clients that you are ethical at fulfilling your contract with client.
3. Surety of Client Protection
Similar to an insurance policy, a contractor license bond is an indicator that you can protect your client’s interest.
For instance, if you fail to keep the end of the bargain, and investigations are determined in favor of the client, the bond issuer will compensate on your behalf for the damage or whatever cause.
And the good thing is that clients will not have to deal with the company, but rather an independent bond issuer.
4. A Sign That You Value your Business
Traditionally, license and insurance are one-way traffic that only covers the client in the event of uncertainty.
Taking on a bonded license, however, will protect both you and your client.
We have already talked about the latter (client protection) in the above point.
Any contractor that is worth their salt knows that anything can happen in the line of their business, and if you are smart, you can plan for potential problems.
For starters, it will cushion you against claims made by against your company, and most importantly, if anything comes up that is not exactly your fault, your surety company will bear the brunt until you make a reimbursement.
5. Homeowners Have a Right to Know
Beside protecting both parties, bonds usually provide additional benefits to the homeowners or clients who hire you.
For starters, homeowners have a right to know whether you are bonded.
Under the California law, for instance, contracts are legally obligated to inform clients on whether a contractor is bonded or otherwise.
6. Makes It Easier for Court Proceedings
Again, if things spiral out of the way to a court, you might have an easy time as most courts usually request for a contractor’s license bond before they proceed.
A bond is in most cases set as the dollar amount by jury, and should be paid by the sued to ensure they show up during trial.
It does not necessarily have to be monetary, but it is used to persuading the defendant to return to court without disincentives.
In summary, a license bond is there to protect against possible losses in a court proceeding as they are usually seen a high risk, which makes them expensive to obtain.
7. Makes It Easier Go After Large Jobs
A bond stamps professionalism, making it a lot easier for a contractor to pursue bigger and more lucrative jobs.
The contractor bond will build your reputation for success, and this provides your company with a greater competitive advantage, making you naturally predisposed to landing more profitable gigs.
Contractor License bonds are a stamp of professionalism, and if you are looking to make the best in this industry, it’s vital that you get yourself a bond.