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Arizona Contractor License Bond

Arizona Contractor License Bonds. Arizona state flag on top with construction hardhats on bottom

A contractor license bond in Arizona is a surety bond that’s required by the state before your contractor license can be issued. The purpose of the bond is to protect the interests your customers and to make sure all applicable regulations and laws are upheld.

Specifically, the contractor license bond provides assurance that you will follow all the provisions that have been outlined in the Arizona Revised Statutes. If you fail to do this, it can result in a claim being filed against your bond. Each valid clam must be reimbursed up to the bond’s total value.

What Bond Amount is Needed?

This depends on what type of work the contractor is performing and what their annual gross volume is anticipated to be. The table below summarizes the bond requirements for each contractor classification and estimated revenue.

 

This colorful chart show Arizona Contractor license bond requirements based on the contractors size and scope of work

 

Who Should Get an Arizona Contractor License Bond?

The actual bonding requirements are applicable to an array of different contractors. If you aren’t sure if this bond is required, you can contact the Arizona Registrar of Contractor to find out for sure.

Generally, both commercial and residential contractors will require a bond. If you work in both areas, you are going to have to get two separate licenses, which means two individual contractor license bonds, as well. The requirement from the State Registrar reads:

Any business which 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, or to do any part of the work must be a licensed contractor.

Also included in work requiring a license is the erection of scaffolding, connections to utility service lines, metering devices and sewer lines, mechanical or structural service to a structure or improvement and any other work in connection with the project.

“Contractor” includes subcontractors, floor covering contractors, hardscape contractors and consultants representing themselves as having the ability to supervise or manage a construction project for the benefit of the property owner.

Supervision or management includes hiring and firing of specialty contractors, scheduling of work on the project, and selection and purchasing of construction material.

Contractors must be properly licensed before submitting bids.” More can be read about the license requirements here.

How Do You Get an Arizona Contractor License Bond?

They bonds are easily obtainable for most contractors. Underwriting is usually just a credit check on the primary owners. If credit is acceptable, these bonds can normally be issued instantly in a matter of minutes. Contractors should expect to give their names, address, social security number and license or application number if they have it.

Arizona Contractor License Bonds: Premiums and Costs

The cost of your mostly depends on the credit of the primary owner. Standard rates are about 1% with preferred rates being less than 0.5%. Contractors also receive a discount for purchasing multiple years upfront. Discounts can be 20% – 40%.

Is it Possible to Get a Contractor License Bond in Arizona if You Have Bad Credit?

There is typically a way to bond all applicants. Contractors with higher credit can expect to pay more than the standard rates but there are plenty of options. MG Surety works with 25+ bond companies so that we can find the best rate for all clients.

Becoming a Contractor in the State of Arizona

In addition to obtaining your contractor license bond, you will need to take the steps below:

  • Identify a Qualifying Party
  • Meet the Experience Requirements
  • Pass Exams
  • Submit to Background Checks
  • Form a Legal Entity
  • Pay the Fees
  • Provide a Government ID
  • Complete and Submit an Application

Keep in mind that an Arizona Contractor’s License Bond is issued on the principle of indemnity. That means if a valid claim is made, the bond company will seek reimbursement from the contractor for any amounts they pay out. Fortunately, the bond company must investigate and make sure the claim is valid. This is a major reason why a contractor may want to post a surety bond instead of an irrevocable letter of credit.