Nevada Contractor License Bond: A Comprehensive Guide

January 27, 2021

This guide provides information for insurance agents to help contractors on Nevada Contractor License bonds

At a Glance:

• Average Cost: Between 2% to 10% of the bond amount per year, based on the contractor’s credit score
• Bond Amount: Determined by the SCB on a case by case basis. The limit can range between $1,000 to $500,000
• Who Needs It: All individuals and businesses seeking to obtain a contractor license in the State of Nevada
• 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 Nevada: The Nevada State Contractors Board (SCB)

Background

Nevada Revised Statute 624.240 requires contractors operating in the state to obtain a license with the SCB. The Nevada legislature enacted the licensing laws and regulations to ensure that contractors engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, contractors must either deposit cash or purchase and maintain a contractor license surety bond to be eligible for licensure.

What is the Purpose of the Nevada Contractor License Bond?

Nevada requires contractors to purchase the Contractor License Bond as part of the application process to obtain a 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 Nevada Contractor License Surety Bond?

BondExchange makes obtaining a Nevada 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 ensures that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.

How Does the SCB Determine the Bond Amount?

The SCB determines the limit on the contractor license bond on a case by case basis. The SCB will examine the following factors when determining a contractor’s required bond limit:

• License type
• Past, present and projected future financial responsibility
• Experience level
• Moral character

Is a Credit Check Required for the Nevada Contractor License Bond?

Surety companies will run a credit check on the owners of the contractor company to determine eligibility and pricing for the Nevada 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.

How Much Does the Nevada Contractor License Bond Cost?

The Nevada Contractor License surety bond can cost anywhere between 2% 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 $20,000 bond requirement.

$20,000 Bond Limit

*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 Nevada Define “Contractor”

To paraphrase Nevada Revised Statute 624.010, a contractor is any individual who constructs, alters, excavates, or repairs any building structure as an independent business.

Exemptions to this definition include:

• Work performed by an authorized government agency
• Any entity exempt under Internal Revenue Service Code, 26 U.S.C statute 501(c)(3)
• An officer of a court performing his or her duties
• Work performed by a public utility company
• An individual performing work on their personal property that is not for sale
• Projects costing less than $1,000
• The sale or installation of any product that does not become permanently affixed to a structure
• Work financed by the federal government and performed on land owned by the federal government
• Real estate brokers/salespeople assisting clients in the repair or alteration of property offered for sale

How Do Contractors Apply for a License in Nevada?

Contractors in Nevada must navigate several steps to secure their contractors license. Below are the general guidelines, but contractors should refer to the State Contractors Handbook for details on the process.

License Period – The Nevada contractor license is valid for two years from the date of issuance and must be renewed before the expiration date

Step 1 – Determine the License Classification

Nevada classifies all contractor licenses based on the type of work the contractor performs. Below are the different classifications and sub classifications for the  Nevada Contractor License.

Classification A: General Engineering

Classification B: General Building

*Contractors who have experience in both A and B license classifications can apply for an AB license classification allowing them to perform work outlined in either license classification

Classification C: Plumbing and Heating Contracting

Step 2 – Hire a Qualifying Individual

Contractors who do not have the expertise to handle the day to day operations of their business must employ a qualifying individual who has knowledge and expertise in the contractor’s license classification(s). The qualifier must have at least 4 years of experience, within the past 10 years, in the classification(s) the contractor is applying for. The qualifying individual is responsible for passing the state administered licensing exam (more on this topic later). Qualifiers will need to submit one of the following types of documentation verifying their work experience:

• • 4 Certification of Work Experience Forms for each trade qualifier
  • A current government issued masters certification in a field significantly similar to the contractor’s license classification(s)
  • Proof of relevant military experience

Contractors will need to submit a resume of experience for the qualifying individual with their license application.

Step 3 – Prepare Financial Statements

Contractors in Nevada will need to request a monetary limit to projects they can undertake. The limit should reflect the contractor’s financial responsibility and ability to complete complex and labor intensive projects. Contractors will need to submit a financial statement specific to their requested monetary limit with their license application.

$10,000 Monetary Limit

• • A current financial statement prepared by a independent certified public accountant (CPA)

OR

• • A current business financial statement or personal financial statement

OR

• • A current financial statement prepared using an approved accounting software followed by an affidavit verifying the accuracy of the financial statement

More than $10,000 but less then $50,000 Monetary Limit

• • A compiled financial statement prepared by a CPA within six months of the license application date

OR

• • A CPA reviewed or audited financial statement that is current within one year of the license application date

More than $50,000 but less than $250,000 Monetary Limit

• • A compiled financial statement, with full disclosures, prepared by a CPA within six months of the license application date

OR

• • A CPA reviewed or audited financial statement that is current within one year of the license application date

$250,000 or Greater Monetary Limit

• • A financial statement that has been prepared, reviewed, and audited by a CPA within one year of the license application date

AND

• • A bank verification form prepared by the contractor’s bank

Step 4 – Purchase Insurance

Contractors must purchase industrial insurance (limits not specified) and submit proof of insurance with their license application. Contractors who meet any of the following criteria are exempt from this requirement:

• • Has no employees
  • Is not a subcontractor and does not intend on becoming one
  • Does not submit any bids on jobs for a principal contractor or subcontractor

Step 5 – Complete the Application

All contractor regulatory license applications should be mailed to:

Nevada State Contractors Board
2310 Corporate Circle, Suite 200
Henderson, Nevada 89074

Contractors must complete the application, including the following steps:

5.a Background/Fingerprint Waiver Form – Contractors will need to complete the background check and fingerprint waiver forms and submit them with their application. The forms can be found in the application packet.

5.b Identification – All applicants must submit a copy of their drivers license or another form of government issued identification with their application

5.c Residential Recovery Fund – Residential contractors who perform qualified services must register for the residential recovery fund, which provides financial assistance to homeowners harmed by a contractor’s poor job performance

5.d Fees – All contractors will need to submit a $300 application fee with their license application

Step 6 – Pass the Exam

Once the contractor’s application has been approved, the qualifying individual will receive an exam eligibility form containing instructions on how to register for and complete the licensure exam. Contractors can learn more about the exam requirements here.

Step 7 – Purchase a Surety Bond

After having their license application approved, the SCB will determine the bond amount the contractor will need to purchase prior to receiving their license

How Does a Nevada Contractor Renew Their License?

Contractors can renew their license through the SCB’s licensing portal. The Nevada contractor license is valid for two years from the date of issuance and must be renewed before the expiration date

What Are the Insurance Requirements for Contractors in Nevada?

The State of Nevada requires contractors to purchase industrial insurance (limits not specified). Contractors will need to purchase and maintain a contractor license surety bond.

How Do Nevada Contractors File Their Bond With The Nevada SCB?

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

Nevada State Contractors Board
2310 Corporate Circle, Suite 200
Henderson, Nevada 89074

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 city of the entity/individual(s) buying the bond
• Bond amount
• Date the bond goes into effect

What Can Contractors Do to Avoid Claims Against the Nevada Contractor License Bond?

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 provisions of all contracts and remove unnecessary property liens
• Pay all employees, suppliers and vendors

What Other Insurance Products Can Agents Offer Contractors in Nevada?

Nevada requires contractors to obtain industrial insurance. Bonds are our only business at BondExchange, so we do not issue liability 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 Nevada Contractor Customers?

Nevada 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.