Virginia Contractor License Bond: A Comprehensive Guide

January 4th, 2021

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

At a Glance:

• Average Cost: Between $350 to $2,500 per year, based on the contractor’s credit score
• Bond Amount: $50,000
• Who Needs It: All individuals and businesses seeking to obtain either a Class A or B contractor license in the State of Virginia
• Purpose: To ensure the public will receive compensation for any damages should the contractor fail to comply with contractor registration law
• Who Regulates Contractors in Virginia: The Virginia Department of Professional and Occupational Regulation (DPOR)

Background

Code of Virginia 54.1-1103 requires contractors operating in the state to obtain a license with the DPOR. The Virginia 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 prove financial responsibility by submitting a financial statement or purchase and maintain a $50,000 contractor license surety bond to be eligible for licensure.

What is the Purpose of the Virginia Contractor License Bond?

Virginia 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 Virginia Contractor License Surety Bond?

BondExchange makes obtaining a Virginia 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.

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

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

The Virginia Contractor License surety bond can cost anywhere between $350 to $2,500 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 $50,000 bond requirement.

$50,000 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 Virginia Define “Contractor”?

To paraphrase Virginia Statute 54.1-1100, a contractor is any individual who performs, is capable of performing, or submits a bid to perform a construction project as an independent business.

How Do Contractors Apply for a License in Virginia?

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

License Period – The Virginia Contractor License expires two years from the last day of the month the license was issued in and must be renewed before the expiration date

Step 1 – Determine the License Class

Virginia requires contractors to obtain specific licenses corresponding to the monetary value of the work performed. Below are the different classes of the Virginia Contractor License.

• • Class A – Complete individual projects costing $120,000 or more and have a yearly total project costs of $720,000 or more
  • Class B – Complete individual projects costing between $10,000 to $119,999 and have a yearly total project costs of $150,000 to $719,999
  • Class C – Complete individual projects costing between $1,000 to $9,999 and have a yearly total project costs of less than $150,000

Step 2 – Determine the License Specialty

Contractors will need to obtain a specific license corresponding to the type of work performed. Contractors can find a full list of all of the specialty designations on page 3 of the application form.

Step 3 – Designate all Responsible Management

Contractors are required to designate all corporate officers or business owners who will be responsible for the license and ensuring the business follows all licensing laws. The responsible management will depend on the contractor’s business type, as sole proprietors may not have any partners or executive officers.

Step 4 – Hire a Qualified 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 specialty. Qualified individuals must be either a full time employee or a member of the contractor’s responsible management. All qualified individuals must meet the license and examination requirements for their specialty class as outlined on page 3 of the application form. The experience requirements for qualified individuals differ between license classifications:

• • Class A – At least 5 years of specialty experience
  • Class B – At least 3 years of specialty experience
  • Class C – At least 2 years of specialty experience

Qualified individuals who are required to pass a licensing examination can find a list of exam providers here.

Step 5 – Identify a Designated Employee

Class A and B contractors must designate an employee to take specific portions of the licensing exam. As with the qualified individual, the designated employee must be either a full time employee or a member of the responsible management team. The designated employee must complete the following portions of the licensure exam on behalf of the contracting company:

• • Class A – General, Virginia, and Advanced
  • Class B – General and Virginia

Step 6 – Complete the Pre-License Education

Contractors must have either a member of the responsible management team or their designated employee complete an 8 hour pre-license education. A list of approved educational providers can be found here.

Step 7 – Purchase a Surety Bond Or Prove Financial Responsibility

Contractors must either prove financial financial responsibility or purchase and maintain a $50,000 contractor license surety bond.

*Class C contractors are exempt from this requirement

Step 8 – Complete the Application

Contractor license applications should be mailed to:

Commonwealth of Virginia
Department of Professional and Occupational Regulation
9960 Mayland Drive, Suite 400
Richmond, Virginia 23233-1485

Contractors must complete the application, including the following steps:

8.a Business Entity – Contractors will need to form a business and list their operating structure (corporation, LLC etc.) on their application

8.b Financial Documents – Class A and B contractors will need to submit either a financial statement form, a CPA review/audit, or a surety bond form with their application

Step 9 – Pay Fees

Contractors are required to pay the following application fees when submitting their license application:

• • $385 for Class A contractors
  • $370 for Class B contractors
  • $235 for Class C contractors

How Does a Virginia Contractor Renew Their License?

Contractors can renew their license online through the DPOR’s licensing portal located here. Contractors who are licensed as individuals will need to mail a renewal application to the following address:

Commonwealth of Virginia
Department of Professional and Occupational Regulation
9960 Mayland Drive, Suite 400
Richmond, Virginia 23233-1485

The Virginia Contractor License expires two years from the last day of the month the license was issued in and must be renewed before the expiration date.

What Are the Insurance Requirements for Contractors in Virginia?

The State of Virginia does not require contractors to obtain any form of liability insurance. Class A and B contractors will need to purchase and maintain a $50,000 contractor license surety bond.

How Do Virginia Contractors File Their Bond With The Virginia DPOR?

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

Commonwealth of Virginia
Department of Professional and Occupational Regulation
9960 Mayland Drive, Suite 400
Richmond, Virginia 23233-1485

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
• Acknowledgment of the principal
• Affidavit and acknowledgement of the surety
• Notary signature

What Can Contractors Do to Avoid Claims Against the Virginia 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:

• Do not engage in, or allow any representatives of your business to engage in, any acts of fraud
• Pay employees and subcontractors for work performed
• Pay all suppliers and vendors

What Other Insurance Products Can Agents Offer Contractors in Virginia?

Virginia does not require contractors to obtain any form of liability insurance, however most reputable contractors will seek to obtain liability insurance anyway. 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 Virginia Contractor Customers?

Virginia 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.