California Contractor's License Board increases bond limits for 2023

All California licensed contractors — including plumbing, electrical and artisan contractors — must have a license bond with the California Contractors State License Board. And while the purpose of a contractor bond hasn’t changed, the limits and costs have.

Effective Jan. 1, 2023, the California Contractors State License Board is set to increase the principal bond limits — including those for a responsible managing officer/employee — from the existing limits of $12,500 or $15,000 to a new limit of $25,000.

While it is difficult to estimate what the additional cost will be for a $25,000 bond next year, your contractor clients doing business in California should budget accordingly.

Legislators say the time for change is now

Today, consumers are spending more money on construction projects.

California legislators argue that if the limits of contractor license bond amounts are not adjusted, consumers’ ability to recover from a potential loss substantially diminishes. As a result, last September’s Senate Bill 607 increased the bond limit to ensure contractors have sufficient financial backing to complete a job.

Over the past several years, construction bond limits have been inadequate. As a result, many states have increased limits to what is considered more appropriate amounts. This issue has been exacerbated by a number of factors over the years, as well as today’s current inflation and the cost of building materials, which as of the beginning of the year have increased by 4.9%.

Renewals

For contractors with existing bonds, bond limits will be increased automatically. If the contractor pays the required supplemental premium, the bond will remain in effect with no change to the expiration date.

However, if the contractor does not pay the supplemental premium due, then the expiration date of the bond will be truncated and the carrier or agent will file the required 30-day notice of cancellation with the California Contractors State License Board.

Cole Bogue is vice president of surety at Builders & Tradesmen’s Insurance. She can be reached at 916.772.9200 ext. 333 or cbogue@btisinc.com.

Opinions expressed here are the author’s own.

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