California Contractor License Bond Amount Increase

The California Contractor License Bond Amount Increased to $25,000 in 2023

2022 has officially come to an end, Happy New Year! However, the new year marks the start of a significant change for California contractors. As of January 1st, 2023, the CA Contractor License Bond (CLB), Bond of Qualifying Individual (BQI), and Contractors Disciplinary Bond will increase to a $25,000 bond amount (also called a bond limit) as a result of Senate Bill 607. This article will cover exactly what is changing, how it will affect you, and what you can expect in the coming month regarding your CLB.

What is Senate Bill 607?

In short, Senate Bill 607 requires the bond amounts for the $15K CA Contractor License Bond, $12.5K Bond of Qualifying Individual, and $15K Contractors Disciplinary Bond to increase to $25,000. This bill has several repercussions; the most important one is likely the increase in premium you will pay for your bond(s).

What does a bond amount increase mean for you?

The main impact of an increase in your contractor license bond amount will be the effect on your premium. Your premium, or what you pay for your bond, is a percentage of your bond amount, called your premium rate. Meaning if your premium rate is 1% and you have a bond amount of $15,000, your premium will only be $150. However, if that bond amount increases to $25,000, your premium will increase to $250.

When this bond amount increase goes into effect, most surety companies will send a blanket rider (we’ll talk more about that below) to the Contractors State License Board (CSLB) and bill you the additional premium that you owe. If you fail to pay the premium within the time frame specified by the surety, the surety will then cancel your bond. Remember, your contractor license is not valid without an active bond.

Keep in mind that a premium rate of 1% is merely an example since premium rates vary based on several factors. Depending on the bond type, applicants with excellent credit, significant industry experience, and strong business financials may find their premium rate starting around 1%. However, pool and roofing contractors, those needing a contractors disciplinary bond, and those with nonstandard credit may see higher quotes.

What are sureties doing about the CA Contractor Bond amount increase?

In most cases, when a bond amount increase is required for a single bond statewide, the surety companies will issue what is called a blanket rider. A rider is a document that applies a change to a bond. Riders can be issued for bond amount increases/decreases, name changes, address changes, etc. A blanket rider is simply a rider issued by the surety company that applies a specific change to all the bonds written with that surety.

Unfortunately, some sureties may decide to forgo writing these bonds entirely once the bond amount increase goes into effect. This means that they will cancel all the bonds currently written with their company, requiring all their principals to find new CA contractor bonds with a different surety. For instance, SureTec and Old Republic will no longer be writing California Contractor License Bonds. So, if you had a contractor license bond with either of those sureties, it has likely already been canceled. Apply for a free quote for your California CLB, Bond of Qualifying Individual, or Disciplinary Bond today.

What can you do if your surety cancels your bond?

If your surety company will no longer write any of your California Contractor Bonds as a result of Senate Bill 607, simply apply for a free quote for your bonds with South Coast Surety. We work with a wide variety of surety companies to ensure we can find you the best quote available. Apply for a free quote for your California Contractor Bonds below:

If you have any questions about your bonding needs, please give us a call at (949) 361-1692 or email us at apps@southcoastsurety.com.

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Celebrating 25 Years of Committed Surety Service

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