Tips for Reducing Your Contractor License Bond Premiums
Contractors embarking on new projects, from residential builds and renovations to industrial structures and institutional facilities, likely need to file a license bond. License bonds are typically required as part of holding a contractor's license.
Why? License bonds provide an avenue for clients, subcontractors, and suppliers to pursue financial restitution if the contractor causes damage during the project and is unable to pay.
Requirements for license bonds vary by state and contractor license type, but your premium (the amount you’ll pay for your insurance policy) will be based on a few factors. Here are tips on reducing your contractor license bond premiums.
Check Your Credit Score
Your credit score is one of the main factors used to calculate your premium. A high personal credit score generally indicates a low-risk borrower, so anyone with a high personal credit scores usually receives a lower bond premium.
However, it can help to analyze the accuracy of your credit score, as agencies may be using out-of-date or inaccurate information. Use free online tools to check your credit report for paid-off debts, closed accounts, or redundancies. Any errors should be reported with the individual credit reporting bureaus.
Showcase Financial Responsibility
Many surety companies consider other aspects of your financial history, so you should make a case for your financial responsibility with a statement. A detailed balance sheet showing your assets and equity, income and expense statements, and other financial details can prove your overall stability. Consider working with an accountant to get the right documents in order.
Get a Cosigner
If you’re worried about how your credit may affect your chances of getting a license bond, a cosigner with solid credit can help. They’ll be equally responsible for any liability, so entering into a cosigner relationship shouldn’t be taken lightly. But a trustworthy cosigner with a good financial history can be a great way to lower your license bond premium.
Resolve Complaints & Claims
If you have any outstanding issues from past projects, receiving a license bond for a new project will be difficult. Do your best to resolve claims against past bonds or any complaints filed against your license. Surety companies will see these issues as red flags, though they’ll likely be more flexible if you’re in the resolution process.
Explore Options with Go Bonds
A surety bond provider like GoBonds can help you navigate the license bonds process and determine the best premium for your state, license, and project. Go Bonds works directly with insurance carriers to pair contractors with the best rates and structures, no matter their financial history.