In this article we will review the requirements you need to obtain a contractor’s license in the state of Ohio.
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What Contractor Licenses Are Issued in Ohio?
In Ohio, only specialty contractors in the construction industry (electrical, plumbing, HVAC, etc.) are licensed at the state level by the Ohio Construction Industry Licensing Board (OCILB), which operates under the Department of Commerce. General contractors are licensed at the local level, but not all municipalities have a licensing requirement.
What Are the Steps in the Licensing Process?
The eligibility criteria and licensing process for specialty contractors are laid out on the OCILB website. Applicants must meet specific requirements regarding age, U.S. citizenship status, and experience as well as pass a licensing exam and provide evidence of liability insurance.
The local licensing process varies by jurisdiction. You won’t have to take an exam, but you will have to provide evidence of insurance coverage and, in most cases, furnish a contractor license bond, typically in the amount of $25,000.
Why is a Contractor License Bond Required?
A local contractor license bond provides a measure of financial protection for the municipality (the bond’s “obligee”) and its residents. Specifically, it provides a way for those who suffer financial harm as a result of a contractor’s failure to abide by local building codes to seek compensation by filing a claim against the contractor’s license bond.
The terms of the bond, which is a legally binding contract, obligate the contractor (known as the bond’s “principal”) to pay all valid claims up to the required bond amount. The third party to the contractor license bond (the bond’s “surety”) guarantees the payment of claims.
How Are Contractor License Bond Claims Paid?
Although the principal bears the full legal obligation to pay all claims that the surety finds to be valid, in its role as guarantor, the surety will pay legitimate claims initially, on behalf of the principal. But that doesn’t let the principal off the hook. It merely shifts the obligation from paying the claimant to repaying the surety. The surety can take legal action to recover the claim amount (plus court costs and legal fees) if the principal does not make timely repayment.
How Much Does an Ohio Contractor License Bond Cost?
The annual premium for an Ohio contractor bond is determined by multiplying two factors: the required bond amount established by the obligee and the premium rate assigned to the principal by the surety. The premium rate will reflect the level of risk the underwriters believe the surety will be taking on in paying claims on the principal’s behalf. It’s all about the principal’s creditworthiness.
If your credit score is high, the risk to the surety is considered to be low, so your premium rate will also be low—perhaps as low as 1%, which would make the annual premium for a $25,000 Ohio contractor license bond only $250. Those with poor credit could be assigned a premium rate as high as 3%.
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