Utah Contractor License Bond: A Comprehensive Guide

January 4th, 2021

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

At a Glance:

• Average Cost: 2% to 10% of the bond amount per year, based on the contractor’s credit
• Bond Amount: Determined by the DOPL on a case by case basis, minimum limit of $15,000
• Who Needs It: All individuals and businesses seeking to obtain a contractor license in the State of Utah who do not meet the financial responsibility requirements
• 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 Utah: The Utah Division of Occupational and Professional Licensing (DOPL)

Background

Utah Code 58-55-201 requires contractors operating in the state to obtain a license with the DOPL. The Utah 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 who do not meet the DOPL’s financial responsibility requirements must purchase and maintain a contractor license surety bond to be eligible for licensure.

What is the Purpose of the Utah Contractor License Bond?

Utah 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 Utah Contractor License Surety Bond?

BondExchange makes obtaining a Utah 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 DOPL Determine the Bond Amount?

The DOPL will examine the contractors financial statements and net worth to determine the bond limit. Contractors with strong financial statements and cash reserves might not be required to purchase a bond. The DOPL determines the bond requirements for contractors on a case by case basis specific to each individual contractor.

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

Surety companies will run a credit check on the owners of the contractor company to determine eligibility and pricing for the Utah 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 Utah Contractor License Bond Cost?

The Utah 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 $15,000 bond requirement.

$15,000 Contractor License Bond

*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 Utah Define “Contractor”?

Utah Code 13-8-4 defines a contractor as any “person who, for compensation other than wages as an employee, undertakes any work in a construction trade.”

How Do Contractors Apply for a License in Utah?

Contractors in Utah must navigate several steps to secure their contractors license. Below are the general guidelines, but contractors should refer to the DOPL’s contracting page for details on the process.

License Period – The Utah Contractor License expires on November 30 of every odd numbered year (2022, 2024 etc) and must be renewed before the expiration date

Step 1 – Determine the License Type

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

• General – Is able to perform and supervise all aspects of the construction process
• Specialty – Can only perform contract work specific to their specialty classification. A list of all the specialty license classifications can be found here

Step 2 – Complete a Pre-Licensure Education Course

All specialty contractors must complete a 25 hour pre-license education course and general contractors must complete a 30 hour course. Contractors can learn more about the course requirements and find a list of providers here.

Step 3 – Purchase Insurance

Contractors will need to purchase general liability insurance with the following minimum limits:

• • $100,000 per incident
  • $300,000 total coverage

Contractors with employees will also need to purchase worker’s compensation insurance. All contractors must submit proof of insurance with their license application.

Step 4 – Meet the Experience Requirements (General Contractor Only)

General contractors will need to meet the following experience requirements to be eligible for a license:

• • Have at least 2 years (4,000 hours) of paid work experience in the construction industry
    Or
  • Be listed as a qualifier on a current or expired Utah Contractor License for a minimum of 2 years
    Or
  • Have either a 2 or 4 year degree in construction management
    Or
  • Have passed the NASCLA exam for Commercial General Building Contractors
    Or
  • Have been licensed for at least one year in any US territory if the license is currently active and pertains to the same scope of work as the license being applied for in Utah

Contractors who do not meet any of the above requirements will need to hire a qualifier who meets the experience requirements and will need to designate this individual as the qualifier on their license application.

*Plumbing and electrical contractors will need to have a master qualifier listed on their license

Step 5 – Pass the License Exam (General Contractor Only)

General contractors will need to pass the Utah Business and Law Exam and submit their exam results with their application. Contractors can schedule their exam here. General contractors will not need to take an exam if they meet any of the following criteria:

• • Have at least one year of licensed experience in another state
  • Have been listed as a qualifier on a Utah Contractor License prior to May 9, 2017

Step 6 – Complete the Application

All contractor regulatory license applications should be mailed to:

DOPL
PO Box 146741
Salt Lake City, Utah 84114-6741

Contractors must complete the application, including the following steps:

6.a EIN – Contractors will need to obtain an Employer Identification Number (EIN) and list it on their application. Applicants can obtain an EIN here.

6.b Tax Registration – All contractors must obtain a state withholding tax registration. Contractors can obtain a state withholding tax registration with the Utah State Tax Commission.

6.c Unemployment Registration – Contractors will also need to obtain unemployment registration from the Utah Department of Workforce Services

Step 7 – Pay Fees

Contractors will need to pay the following fees when submitting their application:

• • $50 fee for each qualifier listed on the application
  • $175 fee for each classification
  • $1 surcharge fee

Contractors whose business structure is not a corporation will need to pay a $20 fee for each owner who owns less than an 8% stake of the business.

Step 8 – Purchase a Surety Bond

After the contractor has submitted their application, the DOPL may require the contractor to purchase a surety bond with a custom limit based on the contractor’s financial standing.

How Does a Utah Contractor Renew Their License?

Contractors can renew their license online through the DOPL’s licensing portal. Contractors will need to complete the following steps when renewing their license:

• Pay the $114 renewal fee
• Complete six hours of continuing education. Contractors can find a list of course providers here.

The Utah Contractor License expires on November 30 of every odd numbered year (2022, 2024 etc) and must be renewed before the expiration date.

What Are the Insurance Requirements for Contractors in Utah?

The State of Utah requires contractors to purchase liability insurance with a minimum limit of $300,000. Contractors with employees will also need to purchase worker’s compensation insurance. Contractors may need to purchase and maintain a contractor license surety bond.

How Do Utah Contractors File Their Bond With The Utah DOPL?

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

DOPL
PO Box 146741
Salt Lake City, Utah 84114-6741

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 address of the entity/individual(s) buying the bond
• Surety company’s name
• Bond amount

What Can Contractors Do to Avoid Claims Against the Utah 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:

• Pay all required taxes and fees
• Pay employees and subcontractors for work performed
• Pay all suppliers and vendors

What Other Insurance Products Can Agents Offer Contractors in Utah?

Utah requires contractors to obtain liability insurance. Contractors with employees will also need to purchase worker’s compensation 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 Utah Contractor Customers?

Utah 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.