Arizona Contractor License Surety Bonds

 

Arizona Contractors License Bonds Explained

Contractors license bonds are surety bonds that must be obtained by contractors before any contract work can be completed. These bonds are used to protect the customer and to ensure that applicable laws and regulations are being followed.

What is the purpose of this bond?

To be more exact, an Arizona contractor license bond is used to ensure that provisions seen in Chapter 10 of the Arizona Revised Statutes are being followed. If these statutes aren’t followed precisely, then that can lead to a claim against your bond and possible financial consequences made on your behalf. All claims that are valid must be reimbursed up to the total value of the bond being posted.

General and Specialty Contractors

These bonds apply to general and specialty contractors in Arizona. Specialty contractors are contractors that provide a service for a specific job. This could be jobs related to painting, lighting, plumbing, heating and cooling systems, etc. Instead of overseeing the entire construction project, specialty contractors focus more on a specialized task. But all in all, customers needing these services must be protected through a contractor bond. General contractors, on the other hand, are involved in the whole construction project rather than a specific task. Specialty contractors are usually hired for a specific job on a project, so general contractors might be used to oversee the tasks of the entire project.

Electrical and Telecommunications Contractors

Other common Arizona contractors that need license bonds are electrical and telecommunications contractors. Many electrical contractors have their own specialty, but they all are focused around providing electrical services like wiring installation, wire repair, system replacement, etc. If electrical work is needed, then an electrical contractor is typically hired. Telecommunications contractors, on the other hand, are contractors used to install or maintain telecommunications systems. While one of these contractors can be used for a variety of purposes, they are typically needed to install, maintain, and repair phone lines, wireless networks, and more.

Do you need a contractor license in Arizona?

According to the Arizona Registrar of Contractors website, a contractor's license must be obtained by any person or business who “contracts or offers to contract to build, alter, repair, add to, subtract from, improve, move, wreck or demolish any building, highway, road, railroad, excavation or other structure, development or improvement.”

Who needs to post a contractor’s license bond in Arizona?

For any construction job in Arizona where labor and materials cost more than $1,000, a license bond is required. Arizona has three main license classification areas to consider:

General Commercial Contractors (B-1)

This allows contractors to take on a job of any size. This could be massive commercial construction projects or small home remodeling work.

General Small Contractors (B-2)

This pertains to work on pretty much any job, but the work must cost less than 750 000 for labor and costs.

General Residential Contractors

This only involves work on residential jobs. It pertains to all work, whether that be construction, remodeling, or repair. This license also covers specialized licenses like general remodeling/repair, residential engineering, and general swimming pool.

Other types of contractor license bonds in Arizona

There are four different types of licenses where a bond is needed in Arizona. The four license categories include:
  • Residential General Contractor
  • Residential Specialty Contractors
  • Commercial General Contractors & General Engineering Contractors
  • Commercial Specialty Contractors
Bond amounts depend on the size of the construction project and credit score of the contractor, so it’s best to understand these to get an accurate assessment of the bond amounts that will need to be posted.

How do I get a contractors bond?

If you’re a contractor in Arizona that needs a contractor's bond, then the process is pretty easy and straightforward. And luckily, many steps can be completed online.

How do you get bonded in Arizona?

The first step to receiving a bond Arizona solution involves completing an online application from a reputable surety bond provider. There are many providers out there that can provide this service and offer a speedy bond quote.

How to apply for a Arizona contractor license?

If you want to become a contractor in Arizona, then you’ll need to go through an application process with the Arizona Registrar of Contractors. Requirements vary depending on the type of contractor you are, so check their website for the latest information.

How much does an Arizona contractors license bond cost?

There are many factors that go into the amount required for a license bond. The different factors include:
  • License type
  • Annual gross volume
  • Type of service
  • Credit score
  • Total bond amount
As an example, for a residential specialty contractor with a volume of work that is less than 375 000, the amount required for a surety bond will cost around $4,250. Premiums will then be paid based on a percentage of that full bond amount, which can be as little as 0.75% of the total value of the bond.

What happens if I have bad credit?

There are options for those with bad credit, but the premium you pay might be pretty substantial.

Options for applicants with bad credit

If you have bad credit, then bonding premiums can go up by more than 10% compared to those with decent credit.

How do I renew or cancel my contractor’s license bond?

To renew a license, this can be done through the Registrar of Contractors’ Online Renewal System. A renewal fee is needed for this. To cancel, state of Arizona contractors must fill out and submit the License Cancellation Form RC-L-201A to the Arizona Registrar of Contractors. However, it's important to note that a canceled license cannot be reactivated.

What happens in case of a claim?

Claims should be avoided at all costs, so do you best to sort out any disputes before a surety bond claim is used. Claims can be extremely time-consuming and costly. If a claim can’t be avoided, then contact your bonding company to explain the situation. They will explain the next steps. Read more about what exactly is a contractor license bond.