Alaska Construction Contractor Bond: A Comprehensive Guide

November 5th, 2020

This guide provides information for insurance agents to help contractors on Alaska Construction Contractor bonds

At a Glance:

• Average Cost: 1.5% – 7.5% of the bond amount per year, based on the business owner’s credit
• Bond Amount: 
  • $5,000 for handymen
  • $10,000 for home inspectors and mechanical/specialty contractors
  • $20,000 for residential general contractors
  • $25,000 for commercial general contractors
• Who Needs It: All individuals and businesses that act as builders/contractors in the State of Alaska
• Purpose: To ensure the public will receive compensation for any damages should the contractor fail to comply with contractor licensing law
• Who Regulates Contractors in Alaska: The Alaska Department of Commerce, Community, and Economic Development (DOCCED)

Background

Alaska Statutes 08.18 requires construction contractors operating in the state to obtain a license with the DOCCED. The Alaska legislature enacted licensing laws and regulations to ensure that contractors engage in ethical business practices. In order to provide financial security for the enforcement of the license law, contractors must post a cash deposit or purchase and maintain a construction contractor surety bond to be eligible for licensure.

***The differences between a surety bond and a cash deposit are explained in detail here.***

What is the Purpose of the Alaska Construction Contractor Bond?

Alaska requires contractors to purchase the Construction Contractor Bond as part of the application process for the Construction Contractor License. The bond ensures that the public will receive compensation for financial harm if the contractor fails to comply with the licensing regulations. In short, the bond is a type of insurance that protects the public if the contractor breaks licensing laws.

How Can an Insurance Agent Obtain an Alaska Construction Contractor Surety Bond?

BondExchange makes obtaining an Alaska Construction Contractor Bond easy. Simply login to your account and use our keyword search to find the “contractor” bond in our database. Don’t have a login? Enroll now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone (800) 438-1162, email, or chat from 7:30 AM to 7:00 PM EST to assist you.

At BondExchange, our 40 years of experience, leading technology, and access to markets ensure that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.

Is a Credit Check Required for the Alaska Construction Contractor Bond?

Surety companies will run a credit check on the owners of the construction company to determine eligibility and pricing for the Alaska Construction Contractor bond.

Contractors with excellent credit and work experience can expect to receive the best rates. Contractors with poor credit may be declined by some surety companies or pay higher rates. The credit check is a “soft hit”, meaning that the credit check will not affect the contractor’s credit.

How Much Does the Alaska Construction Contractor Bond Cost?

The Alaska Construction Contractor surety bond can cost anywhere between 1.5% to 7.5% of the bond amount per year. Insurance companies determine the rate based on a number of factors including your customer’s credit score and experience. We also offer easy interest-free financing for premiums over $500. The chart below offers a quick reference for the approximate bond cost on the $25,000 bond requirement.

$25,000 Alaska Construction Contractor Bond Cost

*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.

How Does Alaska Define “Construction Contractor”?

To paraphrase Alaska Statutes 08.18.171, a construction contractor is any person or business entity who performs, is capable to perform, or submits a bid to perform a construction project as an independent business.

How Do Contractors Apply for a License in Alaska?

Contractors in Alaska must navigate several steps to secure their construction contractor’s license. Below are the general guidelines, but contractors should refer to the Department of Commerce, Community, and Economic Development’s construction contractors page for details on the process.

License Period – The Alaska Construction Contractors License expires on September 30 of every even-numbered year (2020, 2022, etc) and must be renewed before the expiration date.

Step 1 – Determine the License Type

Alaska requires contractors to obtain specific licenses corresponding to the nature in which the contractor’s business operates. Below are the different types of Alaska Construction Contractor licenses.

• • General Contractor – Utilizes 4 or more trades and supervises all subcontractors
  • Handyman Contractor – Performs contract work for projects that are $10,000 or less
  • Mechanical Contractor – Performs mechanical services such as plumbing, air venting, pipe fitting, etc.
  • Specialty Contractor – Specializes in 1-3 specific trades only. Contractors can find a list of approved trades here.
  • Residential Contractor – A general contractor who performs residential work only

Step 2 – Purchase Insurance

All construction contractors must purchase and maintain general liability insurance with the following minimum limits:

• • $20,000 property damage
  • $50,000 for physical injury
  • $100,000 for physical injury to two or more people

Contractors will need to submit proof of insurance with their application.

Step 3 – Purchase a Surety Bond or Deposit Cash

Contractors must deposit cash or purchase and maintain a construction contractor surety bond in the following amounts:

• • $5,000 for handymen
  • $10,000 for home inspectors and mechanical/specialty contractors
  • $20,000 for residential general contractors
  • $25,000 for commercial general contractors

If the contractor chooses the cash deposit, the cash will not be returned until 3 years after the date the contractor ceases work or 3 years after a surety bond is filed.

Step 4 – Obtain a Business License

All businesses operating in the State of Alaska must obtain a business license with the Alaska Department of Commerce, Community, and Economic Development. Contractors can obtain a business license here.

Step 5 – Complete the Application

All construction contractors regulatory license applications should be mailed to:

Construction Contractors Program
State Office Building, 333 Willoughby Avenue, 9th Floor
PO Box 110806
Juneau, AK 99811-0806

Contractors must complete the application corresponding to their specific license type, including the following steps:

• • 5.a Worker’s Compensation – All Alaska businesses who have employees must purchase worker’s compensation insurance. All contractors should submit the Worker’s Compensation Worksheet with their application, and contractors who are required to obtain worker’s compensation insurance must submit proof of insurance with their application.
  • 5.b Business Registration – Contractors who operate as either a corporation or LLC must register their business with the DOCCED. Contractors can register their business here.

Step 6 – Pay Fees

Contractors must submit the $350 application fee with the application.

How Do Alaska Contractors Renew Their License?

Specialty and Mechanical Contractors can renew their license online through Alaska’s online renewal portal located here.

All other construction contractor licenses must renew with a paper application that is released on November 30th of each renewal period. The Alaska Construction Contractors License expires on September 30 of every even-numbered year (2020, 2022, etc) and must be renewed before the expiration date.

What Are the Insurance Requirements for the Alaska Construction Contractors License?

The State of Alaska requires construction contractors to obtain general liability insurance with minimum limits of 20/50/100. Contractors who have employees will also need to obtain worker’s compensation insurance. In addition, contractors must deposit cash or file a construction contractor surety bond in bond amounts based on their license type.

How Do Alaska Construction Contractors File Their Bond With The Alaska DOCCED?

Contractors should mail the completed bond form, including the power of attorney, to the following address:

Construction Contractors Program
State Office Building, 333 Willoughby Avenue, 9th Floor
PO Box 110806
Juneau, AK 99811-0806

The construction contractor surety bond requires signatures from both the surety company and the contractor. The surety company should include the following information on the bond form:

• Legal name and license type of entity/individual(s) buying the bond
• Surety company’s name, address, and phone number
• Bond amount
• Date the bond is signed and goes into effect

How Can Alaska Contractors Avoid Bond Claims?

To avoid claims on the Construction Contractor Bond, contractors must follow all license regulations in the state, including some of the most important issues below that, tend to cause claims:

• Pay all laborers and employees
• Abide by contracts and repair improper or negligent work
• Pay taxes and contributions due to the state and municipalities on time and in full
• Repair all public facilities damaged through the course of the project
• Pay suppliers for all materials and equipment

What Other Insurance Products Can Agents Offer Contractors in Alaska?

Alaska requires construction contractors to obtain general liability insurance. In addition, contractors with employees will have to purchase workers’ compensation insurance. Bonds are our only business at BondExchange, so we do not issue any form of insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.

How Can Insurance Agents Prospect for Alaska Contractor Customers?

Alaska conveniently provides a public database to search for active construction contractors in the state. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.