Arizona Contractor License Bond: A Comprehensive Guide
November 10th, 2020
This guide provides information for insurance agents to help contractors on Arizona Contractor License bonds
At a Glance:
- Average Cost:
- Commercial Contractors:
- 0.5% of the bond amount for all bond limits up to $50,000, no credit check
- 1% – 5% of the bond amount for limits over $50,000, based on the business owner’s credit
- Residential Contractors:
- 2% of the bond amount for limits up to $4,250, no credit check
- 3 – 10% of the bond amount for limits over $4,250, based on the business owner’s credit
- Dual Contractors:
- 1% – 10% of the bond amount, based on the business owner’s credit
- Commercial Contractors:
- Who Needs It: All individuals and businesses that act as commercial, residential, general, and specialty contractors in the State of Arizona
- 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 Arizona: The Arizona Registrar of Contractors (ROC)
- Bond Amount: Arizona determines the bond limit based on the contractor’s license type and total annual revenue. The below table from the ROC’s website illustrates the bond limit for all contractor licenses in Arizona:
| License Type | Contemplated Gross Volume (Per License) | Bond Amount |
| Residential General Contractors | Less than $750,000 | $9,000 |
| $750,000 or more | $15,000 | |
| Residential Specialty Contractors | Less than $375,000 | $4,250 |
| $375,000 or more | $7,500 | |
| Commercial General Contractors (Includes General Engineering Contractors) | $150,000 or less | $5,000 |
| In excess of $150,000 but not more than $500,000 | $15,000 | |
| In excess of $500,000 but not more than one million | $25,000 | |
| In excess of one million but not more than five million | $50,000 | |
| In excess of five million but not more than ten million | $75,000 | |
| Over ten million | $100,000 | |
| Commercial Specialty Contractors | $150,000 or less | $2,500 |
| In excess of $150,000 but not more than $500,000 | $7,000 | |
| In excess of $500,000 but not more than one million | $17,500 | |
| In excess of one million but not more than five million | $25,000 | |
| In excess of five million but not more than ten million | $37,500 | |
| Over ten million | $50,000 |
Table 1.1 Arizona Contractor Bond Amounts
Background
Arizona Revised Statutes 32-1103 requires contractors operating in the state to obtain a Contractors License with the Registrar of Contractors. The Arizona 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 contractor’s license surety bond to be eligible for licensure (bond amounts outlined in Table 1.1).
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What is the Purpose of the Arizona Contractor License Bond?
Arizona requires contractors to purchase the Contractor License Bond as part of the application process for the 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 Arizona Contractor License Bond?
BondExchange makes obtaining an Arizona Contractor License 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 Arizona Contractor License Bond?
For most Arizona contractors, surety companies will run a credit check on the owners of the company to determine eligibility and pricing for the Arizona Contractor License bond.
However, bond limits of $50,000 or under for commercial contractors and bond limits of $4,250 or less for residential contractors, will not need to have their credit reviewed to determine their bond cost. For all other Arizona contractor bonds, the surety will review credit and determine the pricing based on the credit details.
Contractors with excellent credit and work experience can expect to receive the best rates, while 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 Arizona Contractor License Bond Cost?
The Arizona Contractor License surety bond can cost anywhere between 0.5% to 10% 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 for each of the three main license types:
$75,000 Arizona Commercial Contractor Bond Cost
| Credit Score* | Bond Cost (1 year) |
|---|---|
| 675+ | $750 |
| 650 – 674 | $1,500 |
| 600 – 649 | $2,150 |
| 550 – 599 | $3,000 |
| 500 – 549 | $3,750 |
Table 1.2 $75,000 Commercial Contractor Bond Cost
$15,000 Arizona Residential Contractor Bond Cost
| Credit Score* | Bond Cost (1 year) |
|---|---|
| 675+ | $450 |
| 650 – 674 | $563 |
| 600 – 649 | $600 |
| 550 – 599 | $938 |
| 500 – 549 | $1,500 |
Table 1.3 $15,000 Residential Contractor Bond Cost
$20,000 Arizona Dual Contractor Bond Cost
| Credit Score* | Bond Cost (1 year) |
|---|---|
| 680+ | $500 |
| 650 – 679 | $675 |
| 625 – 649 | $775 |
| 600 – 624 | $900 |
| 575 – 599 | $1,300 |
Table 1.4 $20,000 Dual 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 Arizona Define “Contractor”?
To paraphrase Arizona Revised Statutes 32-1101, a contractor is any person or business entity who performs, offers to perform, or bids to person construction services in the state of Arizona either directly or by supervising others.
How Do Contractors Apply for a License in Arizona?
Contractors in Arizona must navigate several steps to secure their contractor’s license. Below are the general guidelines, but contractors should refer to the ROC’s licensing page for details on the process.
License Period – The Arizona Contractor License expires two years from the date of issuance and must be renewed before the expiration date.
Step 1 – Determine the License Type
Arizona requires contractors to obtain specific licenses corresponding to the nature in which the contractor’s business operates. Below are the different types of Arizona Contractors Licenses.
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- Residential General Contractor – Can construct or repair any residential property
- Residential Specialty Contractor – Can engage in contract work corresponding to their specialty classification(s) on a residential property. A full list of specialty classifications for a residential specialty contractor can be found here.
- Commercial General Contractor – Can construct, alter, and repair any commercial property. Can also supervise subcontractors performing work on a property.
- Commercial Specialty Contractor – Can engage in contract work corresponding to their specialty classification(s) on a commercial property. A full list of specialty classifications for a commercial specialty contractor can be found here.
- Engineering Contractor – Can engage in specialty engineering work as outlined here.
- Dual Contractor – Contractors can obtain a dual contractor license which allows them to engage in both commercial and residential contract work for their license type (general, specialty and engineering)
Step 2 – Form a Business Entity
Contractors must form a business entity to receive a license. Contractors can form either a corporation, LLC, partnership, or sole proprietorship. To form their business entity, contractors should register with the Arizona Ecorp portal and follow the instructions on how to register their business entity.
Step 3 – Employ a Qualifying Agent
In Arizona, all business entities that hold a contractor’s license must employ an individual that meets the education and experience for each license class. Contractors can find the qualification requirements for each license type here.
Step 4 – Pass the Required Exam(s)
Qualifying agents will need to pass one or more exams corresponding to their license type. The qualifying agent will need to score 70% or higher on the exam(s) and must submit the exam results with their application. Qualifying agents can determine which exam(s) they must pass here, and register to take their exam(s) here.
Step 5 – Purchase a Surety Bond or Deposit Cash
Contractors in Arizona must deposit cash or purchase and maintain a surety bond coinciding with their license type and yearly revenue. Contractors should refer to Table 1.1 to determine their bond limit.
Step 6 – Complete the Application
All contractor license applications should be mailed to:
Registrar of Contractors
P.O. Box 6748
Phoenix, AZ 85005-6748
Contractors in Arizona must complete an application corresponding to the type of business they operate. Below are the different types of applications for the Arizona Contractors License:
Contractors must complete the application corresponding to their business type, including the following steps:
-
- 6.a Government I.D. – Contractors and their qualifying agent(s) must submit a copy of either their driver’s license or passport with the application
- 6.b Background Check – All individuals listed on the contractor license application must submit to a background check and submit a receipt of payment with their application. Contractors and qualifying agents can obtain a background check here.
Step 7 – Pay Fees
Contractors in Arizona must pay an application fee based on their license type and a $66 exam fee for each licensing exam taken. The following table illustrates the application and renewal fees for each Arizona Contractor License.
| License Type | Application Fee | Renewal Fee |
|---|---|---|
| General Commercial | $780 | $580 |
| Specialty Commercial | $580 | $480 |
| General Residential | $870 | $590 |
| Specialty Residential | $720 | $540 |
| General Dual | $1,050 | $750 |
| Specialty Dual | $850 | $650 |
Table 1.5 Application and Renewal Fees
How Do Arizona Contractors Renew Their License?
Contractors in Arizona can renew their license online through the ROC’s licensing portal. Renewal applicants must pay the renewal fee associated with their license type as outlined in Table 1.5. The Arizona Contractor License expires two years from the date of issuance and must be renewed before the expiration date.
What Are the Insurance Requirements for the Arizona Contractor License?
The State of Arizona does not require contractors to obtain any form of liability insurance. Contractors must file a contractor surety bond in bond amounts based on their license type as outlined in Table 1.1.
How Do Arizona Contractors File Their Bond With The Arizona ROC?
Contractors should mail the completed bond form, including the power of attorney, to the following address:
P.O. Box 6688
Phoenix, AZ 85005-6688
The contractor license surety bond requires signatures from both the surety company that issues the bond 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
- Bond amount
- Date the bond is signed
- Date the bond goes into effect
- Notary signature for Attorney at Fact
How Can Arizona Contractors Avoid Bond Claims?
To avoid claims on the Contractor License Bond, contractors must follow all license regulations in the state, including some of the most important issues below that, tend to cause claims:
- Honor the terms of all contracts
- Pay all vendors and subcontractors for work performed
- Do not engage, or allow representatives of the business to engage, in any acts of fraud
What Other Insurance Products Can Agents Offer Contractors in Arizona?
Arizona does not require contractors to obtain general liability insurance. However, most reputable contractors will obtain this insurance anyway. 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 Arizona Contractor Customers?
Arizona conveniently provides a public database to search for active 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.
