The City of Indianapolis (Marion County) requires contractors to be licensed and to provide Indianapolis Contractor License Bonds. Article I of Indianapolis – Marion County Code Section 875-101 reads,
(1) “Any person, partnership or corporation that has entered into a contractual relationship to engage in any construction, land alteration (as defined in section 561-109 of this Code), sewer work (as defined in section 671-2 of this Code), driveway work (as defined in section 645-421 of this Code) or excavation work (as defined in section 645-431 of this Code) with another person, partnership or corporation that holds a property interest in the real estate on which such activity is occurring must be a listed contractor under this article. This requirement shall not apply, however, with reference to persons, partnerships or corporations that are described in section 536-202(a)(2), (4) or (5) of this Revised Code and whose construction is confined to the activities described in those subsections.
(2) If a person, partnership or corporation that engages in any construction, land alteration (as defined in section 561-109 of this Code), sewer work (as defined in section 671-2 of this Code), driveway work (as defined in section 645-421 of this Code) or excavation work (as defined in section 645-431 of this Code) under more than one (1) business name, the person, partnership or corporation shall be required to have a separate listing under this article for each business name.
Based on this definition, most contractors operating in Indianapolis, will need a license and a Contractor License Bond.
Who Are the Parties to an Indianapolis Contractor License Bond?
An Indianapolis Contractor License Bond is a three-party agreement between the Contractor, the Surety and the Obligee. The Contractor is the Principal, the Consolidated City of Indianapolis and/or Unrelated Third Party is the Obligee and the Surety is the bond company that is guaranteeing the obligation.
What Does an Indianapolis Contractor License Bond Guarantee?
The bond protection is very broad. It covers both the City and Unknown obligees if the contractor violates city codes, statutes, laws ordinances, rules or causes damages. It also covers expenses and court costs to correct these code violations. Section 875-109 of the Indianapolis – Marion County Code says,
“a. Compliance with requirements set forth in this chapter that must be met to retain listing and licensure;
- Prompt payment of all fees owed the consolidated city as set forth in this chapter, and Chapters 561 and 645 of this Code;
- Prompt payment to the Consolidated City of Indianapolis for any loss or expense for damages to property of the Consolidated City of Indianapolis caused by any action of the contractor, his or her agents, employees, principals, subcontractors, materialmen or suppliers in violation of requirements of state statute, city regulation or this Revised Code, which requirements must be met to properly carry out construction, a land alteration (as defined insection 561-109of this Code), driveway work (as defined in section 645-421 of this Code) or excavation work (as defined in section 645-431 of this Code) while engaged in any construction, land alteration, sewer work, driveway work or excavation work; and
- Prompt payment to a person, partnership or corporation that is an unknown third party obligee for any:
- Losses arising out of violations;
- Expenses necessary to correct violations; and
- Court costs and attorney fees allowed by the court incurred in connection with the commencement and prosecution of a court action to recover such losses and expenses for violation of requirements of state statute, city regulation or this Revised Code, which requirements must be met to properly carry out construction, a land alteration, sewer work, driveway work, or excavation work on property of the unknown third party obligee, caused by any action of the contractor, his or her agents, employees, principals, subcontractors, materialmen or suppliers while engaged in any construction, land alteration, sewer work or driveway work.”
What is Not Covered by the Bond?
The bond does not cover losses or expenses arising out of negligent conduct or improper workmanship unless the workmanship or improper conduct is a violation of city regulation, the revised code or state statute.
The bond is also not a substitute for performance bonds and payment bonds which are meant to protect the project against mechanics liens and performance issues.
Indiana Contractor License Bond Amounts Required
The amount of the license bond depends on the contractor’s trade. General Contractors must obtain a $10,000 license bond. An Electrical Contractor must also obtain a bond for $10,000. A Heating and Cooling Contractor must obtain a bond for $5,000. Wrecking Contractor requirement depend on if they are licensed for Class A, B or C. A Class A Wrecking Contractor needs a $30,000 license bond. A class B Wrecking Contractor needs a $20,000 license bond. A class C Wrecking Contractor needs a $10,000 license bond. A summary of all contractor bond requirements can be seen on the table below:
How to Obtain an Indiana Contractor License Bond
Obtaining an Indiana Contractor License Bond is easy. These bonds can be purchased instantly below and a matter of minutes. Most of these bonds require no credit checks. The exception is the Class A Wrecking Contractor that does require a credit check. Click on the buttons to purchase a bond instantly.
General Contractor – $10,000 License Bond
Electrical Contractor – $10,000 License Bond
HVACR Contractor – $5,000 License Bond
Wrecking Contractor Class A – $30,000 License Bond (Credit Check Required)
Wrecking Contractor Class B – $20,000 License Bond
Wrecking Contractor Class C – $10,000 License Bond
What About Bad Credit?
All Indiana Contractor License Bonds are instant issue except the class A Wrecking Contractor bond. Therefore, good credit is not a requirement. MG Surety Bonds works 25 surety bond companies, so we have options for all types of circumstances.
Term of the Indianapolis Contractor License Bond
These license bonds run for two years in length. The bond is required to expire on December 31 for all contractors.
General Contractors license bonds expire on even years. For example, 12/31/20, or 12/31/22.
Electrical, HVACR and Wrecking Contractor license bonds expire on odd years. For example, 12/31/21 or 12/31/23.
Regardless of the trade, the contractor must renew or replace the bond as long as they are licensed. If the bond is renewed, a continuation certificate is acceptable.
What Does an Indianapolis Contractor License Cost?
The cost of these bonds depends on the surety bond company they are written with. However, the cost for most contractors will be around 1% per year. For example, a contractor should expect to pay about $200 for a $10,000 General Contractor Bond of two years in length. Some surety bond companies will prorate the premium if the bond is needed for less than two years.
Alternatives to an Indianapolis Contractor License Bond
The state of Indiana will allow a contractor to provide an irrevocable letter of credit instead of a surety bond. The letter of credit is required in the same amount as the bond and must be submitted by an approved lender. It must also provide the same protection to the City and Unknown Third Parties as the surety bond does. There are disadvantages to an Irrevocable Letter of Credit though. First, the collateral requirements may tie up a contractor’s resources that could be used in their business operations. On the other hand, a surety bond is considered unsecured collateral unless a claim is made. Secondly, an irrevocable letter of credit can normally be drawn against with little or no defense. You can read more about surety bonds vs. letters of credit here.
Indiana Contractor License Bonds require the Principle to indemnify. That means that if the surety bond company pays a valid loss, they will seek reimbursement from the contractor and any indemnitors. This is a major difference between surety bonds and insurance and contractors should know that before signing the indemnity agreement.
Other Bonds May Be Required
Contractors doing commercial work may need additional bonds in addition to license bonds. These bonds include bid bonds, performance bonds and payment bonds. These bonds have different costs and underwriting requirements. Our surety bond experts can help you determine which bonds you need and help you obtain them. Additional license and permit bonds may also be needed. Many of these can be purchased instantly on our Indiana Surety Bonds Page.
Getting an Indiana Contractor License Bond is a requirement to keep your license and perform work. These bonds are affordable and easy to obtain. Most contractors can obtain these bonds instantly in a matter of minutes. For additional information on surety bonds, you can contact us anytime.