Surety Bond Professionals is a family-owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your Tennessee contractor license bond needs. Learn how to get a contractor’s license in Tennessee, below.
What Contractor Licenses Are Issued in Tennessee?
The Tennessee Code Annotated establishes the definitions for the various types of contractor licenses issued by the Tennessee Board for Licensing Contractors. Tennessee contractor licenses are broadly categorized in terms of the size/value of projects the contractor is allowed to work on:
|Projects Under $25,000||Projects Over $25,000|
|Home Improvement Contractor license||Prime/General Contractor license|
|Limited Licensed Electrical||Subcontractor license|
|Limited Licensed Plumber||Construction Management license|
Be aware that certain municipalities require contractors working in the jurisdiction to obtain a local license or permit in addition to a license issued by the state.
What Are the Steps in the Licensing Process?
In general, obtaining a state-level contractor’s license in Tennessee involves:
- Passing the Tennessee Business and Law exam
- Providing proof of workers’ compensation and general liability insurance
- Submitting an audited or reviewed financial statement to document net worth and operating capital
- Completing the appropriate license application form
- Submitting the application, supporting documents, and fees to the Tennessee Board for Licensing Contractors
Tennessee contractor licenses are good for two years. When renewing a license, general contractors have the option of providing a contractor’s license bond to supplement working capital and net worth by up to 50%.
Why is a Contractor License Bond Required?
More commonly, the term “contractor’s license bond” refers to the surety bond that some municipalities require before issuing a local license or permit. These are bonds that guarantee that the contractor will comply with local building codes and ordinances. Violations that cause a financial loss to a client or the municipality can result in claims against the bond for compensation of such damages.
There are three parties to these contractor’s license bonds:
- The local licensing authority (the bond’s “obligee”)
- The contractor (the bond’s “principal”)
- The surety company (the “surety”)
The obligee establishes the required bond amount and the principal is legally obligated to pay all valid claims against the bond.
How Are Tennessee Contractor License Bond Claims Paid?
In practice, if the principal doesn’t settle or pay the claim promptly, the surety will make payment to the claimant on behalf of the principal. The principal must then reimburse the surety to avoid legal action.
How Much Does a Tennessee Contractor License Bond Cost?
The premium for a locally required contractor’s license bond is a small percentage of the required amount of the bond. The surety will determine what that percentage will be for a given principal based largely on the principal’s personal credit score. With good credit, the premium rate should be in the range of 1-2%. Applicants with lesser credit may pay a higher premium rate.
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