Surety Bond Professionals is a family-owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your Alabama contractor license bond needs. Learn how to get a contractor’s license in Alabama, below.
What Contractor Licenses Are Issued in Alabama?
Alabama contractors and subcontractors are required to be licensed by the Alabama Licensing Board for General Contractors if they work on commercial jobs valued at $50,000 or more or residential jobs of $10,000 or more, including the cost of labor and material. You may be able to continue working under a license from another state—specifically Arkansas, Louisiana, Mississippi, or Tennessee—if you were licensed in that state for three consecutive years.
A licensed subcontractor can bid on a job as a general contractor but must obtain a general contractor’s license before beginning to work on the job.
Alabama also issues licenses in several construction specialties.
What Are the Steps in the Licensing Process?
Before you apply for an Alabama contractor’s license, you need to have registered your business with the Alabama Secretary of State if you will be operating as anything other than an individual or general partnership.
There are different license applications for general contractors and subcontractors. Certain requirements apply only to general/prime contractors, most notably the requirements to pass the Alabama business/project management exam, provide evidence of a certain net worth and working capital, and proof of general liability insurance.
Both general contractors and subcontractors must provide three letters of reference with their completed application and pay the applicable license fee (currently $300 for general contractors and $150 for subcontractors).
The licensing process for certain contracting specialties also includes a bonding requirement. This bonding requirement applies to HVAC, refrigeration, residential roofing, plumbing, and gas fitting contractors. In some cases, the required bond amount is $10,000 and in others, it’s $15,000.
Why is a Contractor License Bond Required?
When a contractor license bond is required, it’s to ensure the contractor’s compliance with applicable state laws and regulations. An Alabama contractor license bond provides financial protection for the state and a way to compensate the public for damages caused by a licensed contractor’s unlawful or unethical actions.
How Are Contractor License Bond Claims Paid?
Upon submission of a claim, the surety company (referred to simply as the “surety”) will investigate to ensure that the claim is valid. The terms of the legally binding surety bond agreement make the contractor (known as the bond’s “principal”) solely responsible for paying valid claims. However, if the principal doesn’t pay the claim promptly, the surety will. This results in a debt that the principal is legally obligated to reimburse to the surety.
How Much Does an Alabama Contractor License Bond Cost?
The two factors that go into determining the premium for an Alabama contractor license bond are the required bond amount, which is established by the state (the bond’s “obligee”), and the premium rate, which the surety sets on a case-by-case basis. The surety’s main concern is the risk of not being repaid for claims paid on behalf of the principal, so the primary underwriting consideration is the principal’s personal credit score.
With good credit, the premium rate the principal will pay should be in the range of 1-2%.
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