Hawaii Contractor License Bond: A Comprehensive Guide

November 17th, 2020

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

At a Glance:

• Average Cost: 1% – 10% of the bond amount per year, based on the contractor’s credit standing
• Bond Amount: Determined by the Board, Minimum of $5,000
• Who Needs It: All individuals and businesses that act as builders/contractors in the State of Hawaii
• 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 Hawaii: The Hawaii Department of Commerce and Consumer Affairs, Contractors License Board (CLB)

Background

Hawaii revised statutes 444-9 requires all engineering, building, and specialty contractors operating in the state to obtain a license with the CLB. The Hawaii 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 purchase and maintain a contractor license surety bond to be eligible for licensure.

What is the Purpose of the Hawaii Contractors License Bond?

Hawaii 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 a Hawaii Contractor License Surety Bond?

BondExchange makes obtaining a Hawaii 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 Hawaii Contractor License Bond?

Yes, surety companies will run a credit check on the owners of the contracting company to determine eligibility and pricing for the Hawaii Contractor License 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.

What is the Bond Amount on the Hawaii Contractor License Bond?

There is no set bond amount for the Hawaii Contractor License Bond; however, the minimum bond amount is $5,000.

Hawaii Revised Statute 444-16.5 grants the CLB the authority to determine the bond limit on a case by case basis for each contractor. The CLB will examine factors such as the contractor’s experience and financial situation when determining the bond limit.

How Much Does the Hawaii Contractor License Bond Cost?

The Hawaii Contractor License surety bond can cost anywhere between 1% 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 on a $10,000 bond requirement.

$10,000 Hawaii Contractor License 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 Hawaii Define “Contractor”?

To paraphrase Hawaii Revised Statute 444-9, a contractor is any person or business entity who performs engineering, building, or specialty work for a client as an independent business.

How Do Contractors Apply for a License in Hawaii?

Contractors in Hawaii must navigate several steps to secure their contractor’s license. Below are the general guidelines, but contractors should refer to the DCCA’s contractor license page as well as the licensing statutes for details on the process.

License Period – All Hawaii contractor licenses will expire on September 30 of every even-numbered year (2022, 2024, etc) and will need to be renewed by the expiration date.

Step 1 – Determine the License Type

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

• • Type A: General Engineering – Performs contract work requiring specialized engineering knowledge and skill
  • Type B: General Building – Performs contract work related to the building of structures and is versed in two or more trades. Can act as a supervisor over subcontractors
  • Type C: Specialty – Specializes in a specific aspect of the construction process. A full list of specialty contractor trades can be found here.

Step 2 – Meet the Qualifications

Contractors in Hawaii must meet the following minimum requirements to be eligible for licensure:

• • Be at least 18 years old
  • Have a strong reputation for good moral character
  • Have at least 4 years of supervisory experience within the past 10 years

Step 3 – Designate a Principal RME

Contractors who do not have the expertise to handle the day-to-day operations of their business must employ a responsible managing employee (RME) who has knowledge and expertise in the contractor’s line of business.

The RME must meet all of the qualifications outlined in Step 2 and is legally required to directly manage all projects the contractor undertakes. The RME will be considered legally liable, along with the contracting company, for any license violations that occur.

Step 4 – Purchase Insurance

Contractors in Hawaii will be required to purchase liability insurance with the following minimum limits:

Bodily Injury: $100,000 per person/$300,000 per accident
Property Damage: $50,000 per accident

Contractors with employees will also be required to obtain worker’s compensation insurance and submit proof of insurance with their application.

Step 5 – Complete the Application

All contractor license application should be mailed to the following address:

Contractors License Board
Department of Commerce and Consumer Affairs
DCCA, PVL Licensing Branch
P.O. Box 3469
Honolulu, HI 96801

Contractors will need to complete an application corresponding to the nature of their business:

• • Contractor-Business Entity
    • Will need to submit an RME Designation Form
    • The RME will need to submit an RME Application
  • Contractor-Sole Owner

Contractors must complete the application, including the following steps:

• • 5. a Experience Certificates – Applicants will need to submit at least three notarized experience certificates indicating supervisory experience
  • 5.b Completed Projects – Applicants must submit a Chronological History of Projects Form to further illustrate their experience
  • 5.c Financial Statement – An audited, reviewed, or compiled financial statement will need to be submitted with the application along with a report from an independent accountant verifying the information
  • 5.d Credit Report – Applicants will need to submit a credit report for each individual listed on the application that has been obtained within the 5 years leading up to the application’s submission. Applicants can obtain a credit report through the Federal Trade Commission here.
  • 5.e Tax Clearance – Applicants who have lived in Hawaii for longer than one year will need to submit a Tax Clearance Certificate with their application. Applicants can obtain a Tax Clearance Certificate here.

Step 6 – Pay Fees

Contractors will need to pay a $50 application fee when submitting their application. Additional fees may be required after the contractor has passed their exam and has been issued their license.

Step 7 – Pass the Exam

After the contractor has submitted their application, they will receive registration documents to take their exam. The exam will be two parts:

• • Part 1: Business and Law
  • Part 2: Field knowledge in the contractor’s classification

Contractors will need to obtain a passing score on their exam before being issued their license.

How Do Hawaii Contractors Renew Their License?

Hawaii contractors can renew their licenses online through Hawaii’s MyPVL licensing portal.

Contractor licenses expire on September 30 of every even-numbered year (2022, 2024, etc) and will need to be renewed by the expiration date.

What Are the Insurance Requirements for the Hawaii Contractor License?

In addition to the bond, Hawaii requires all contractors to obtain liability insurance with limits outlined in Step 4. Contractors with employees will also need to obtain worker’s compensation insurance.

How Do Hawaii Contractors File Their Bond With the Hawaii CLB?

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

Contractors License Board
Department of Commerce and Consumer Affairs
DCCA, PVL Licensing Branch
P.O. Box 3469
Honolulu, HI 96801

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:

• The legal name of the entity/individual(s) buying the bond
• Surety company’s name
• Bond amount
• Date the bond is signed
• Two notary signatures each for both the principal and surety company

How Can Hawaiian 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:

• Pay all employee wages
• Pay all subcontractors and vendors
• 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 Hawaii?

Hawaii requires all contractors to obtain liability insurance and all contractors with employees to obtain worker’s 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 Hawaiian Contractors?

Hawaii conveniently provides a public database to search contractors in the state. The database can be accessed here. Contact BondExchange for additional marketing resources.