In this article, we’ll walk you through everything you need to understand the Delaware contractor license requirements.
Surety Bond Professionals is a family owned and operated bonding agency with over 30 years of experience. Our expert agents are ready to assist with all your contractor licensing needs.
What Are Different Types of Delaware Contractor Licenses?
In Delaware, the state’s Department of Revenue issues contractor licenses. All general contractors working in Delaware, both resident and nonresident, need to register with the Delaware Division of Revenue. However, they do not need licensing at the state level.
Only contractors who do not maintain a regular place of business in Delaware need to obtain a general contractor license.
However, several municipalities have their own licensing requirements for general contractors. You’ll need to find out what licensing requirements exist in the areas where you do business. Contact us for further assistance.
What Are the Steps in the Licensing Process?
Local licensing requirements vary, but applicants for a general contractor license at the state or local level typically need to:
- Register with the Department of Labor
- Purchase Workers’ Compensation insurance if they have employees
- Apply for a business license
- Purchase a contractor’s license bond (non-resident contractors only)
- Pay an annual licensing fee to the Delaware Division of Revenue
Why is a Delaware Contractor License Bond Required?
A Delaware contractor license bond is a non-resident contractor’s pledge to operate in compliance with all applicable laws and regulations governing the construction industry. Failure to do so can result in a claim for damages being filed against the bond by any party suffering a financial loss as a result of the violation. Thus, the bond provides financial protection for the state of Delaware and for construction project owners, both public and private.
Non-resident contractors must maintain an active contractor license bond in force at all times. This is to avoid license revocation. The required bond amount, also known as the bond’s “penal sum,” is 6% of the contract amount when contracts/subcontracts exceed $20,000. Or 6% of the aggregate of multiple contracts/subcontracts in a calendar year totaling $20,000 or more.
How Are Delaware Contractor License Bond Claims Paid?
There are three parties to a Delaware contractor license bond agreement, which is a legally binding contract among them.
- The “obligee” requiring the contract is the state of Delaware,
- The “principal” is the non-resident contractor required to purchase the bond and legally obligated to pay all valid claims against it, and
- The “surety” is the company guaranteeing the payment of claims by the principal.
Unless the principal fulfills a claim right away, the surety (as the bond’s guarantor) will pay it on the principal’s behalf. That doesn’t let the principal off the hook, however. The principal must still repay the surety for the debt created by the surety’s initial payment of the claim. The surety has no legal responsibility for claims and has the right to take legal action against the principal if not repaid within a reasonable period of time.
How Much Does a Delaware Contractor License Bond Cost?
Contractor license bonds are subject to underwriting to determine whether the bond application will be approved and, if so, what the bond’s premium rate will be. That determination is based on the underwriters’ assessment of the risk the surety will be assuming in providing the bond. The risk, of course, is that the principal will not readily repay the surety after paying a claim on the principal’s behalf.
The key factor considered by the underwriters is the principal’s personal credit score. A high credit score indicates a low risk to the surety and earns the principal a low premium rate, typically in the range of one to two percent. Conversely, a low credit score warrants a significantly higher premium rate due to the greater risk to the surety.
Our surety bond professionals will get you the Delaware contractor license bond you need at a competitive rate.
