Contractors in the state of Nevada carry out many important services for their clients. From construction work to repair services, electrical and plumbing, general contractors play a critical role in service delivery. When a contractor signs a contract with a client, they typically agree on the services that will be provided as well as the time frame.
To prevent cases where a contractor causes damages to their client by violating a contract, most contractors in Nevada are required to be bonded. These businesses need to obtain a Nevada Contractor License bond to ensure that their customers and the state are protected from damages or fraudulent practices caused by the contractor.
What Is a Contractor License Bond?
A Nevada contractors board bond is a type of surety bond that is issued to licensed contractors operating within the state. For example, general contractors in Nevada are typically required by the state to obtain a surety bond along with their license application.
The purpose of this bond is to ensure that contractors who are licensed by the state comply with the required regulations that govern their professional practice. In addition, the state would also want to ensure that the customers of contractors are protected from any negligence or fraudulent activity carried out by the contractor.
How Do Contractors Bonds Work?
At the time a contractor makes an application for a license to operate in Nevada, the state will require them to get a surety bond first. A surety bond is a contract that is signed between three parties: the surety, the obligee and the principal. In the case of contractor bonds, the principal is the contractor that is providing a particular service, the obligee is the customer (the service recipient) and the surety is the insurance company that issues the bond to the contractor (the principal).
A surety bond allows a customer/client to make a claim against the bond in the event that a contractor violates the terms of the contract. The bond also protects the contractor against costly claims that would otherwise financially cripple their services. This is because the surety company will typically handle the claim made by a customer and seek compensation from the contractor at a later date.
Why Does the State Require Contractors to Be Bonded?
The Nevada state contractors board requires licensed contractors to be bonded for many different reasons. For the state, a contractors license surety bond is important because it ensures that all contractors abide by the rules stated in Chapter 624 of the Nevada Revised Statutes.
The operations of contractors in Nevada are regulated by certain rules and regulations set forth by the state. These regulations ensure that contractors are carrying out lawful operations and are abiding by the contracts and time frames that were agreed upon between them and their customers. A bond is basically a guarantee that ensures the contractor will comply with proper practices or else a claim can be made against the bond.
What Is at Risk?
Any negligent practices of contractors in Nevada can result in damages to the state or to the customers of the contractor. For example, a contractor who causes damages to public property while carrying out a project can cause the state to incur unplanned expenses for repair. In addition, contractors who misuse client funds for a particular project or provide fraudulent information in order to obtain money from the client can also cause damages and losses on the part of the client.
To protect against these risks, the Nevada state contractors board requires licensed contractors to post a bond of a certain amount so that claims can be made against the bond for adequate compensation.
How to Get a Contractors License in Nevada?
The Nevada state contractors board has varying requirements for bonds depending on the nature of a business and its operations. The required bond amounts can vary from as little as $1,000 to as much as $500,000. All bonds are typically issued for fixed two-year terms, and the contractor will have the bond valid for the entirety of that period.
The bond amount needed for a business will depend on the following factors determined by the Nevada state contractors board:
- •Financial stability of the business: the board will analyze the operations of a business, as well as its financial records, to determine how financially stable the business is.
- •Experience and track record in the field that the business operates
- •The type of license that is required for the business
- •The risks that the contractor is likely to face and the established monetary limits for compensation
Determining the Surety Bond Cost
The bond amount that is determined by the state represents the amount that can be issued during a claim. It does not necessarily represent the actually cost of the surety bond to the contractor. The actual cost of a Nevada Contractors License Bond typically lies between 1%-3% of the face value of the bond (if you have good credit). Lower credit scores or other issue may raise your premium payments to about 5%-15% of the bond’s value.
The premium is normally paid for the two-year period that the bond is issued, after which a review of the bond amount may occur or a new bond may have to be issued altogether.
How to Obtain a Nevada Contractors License Bond
If you need to obtain a Nevada contractors bond for your business, you should first contact the Nevada State Contractors Board to determine the type and bond amount that you will need. You can then contact NFP to begin the application process for a Nevada State Contractors Board license bond. You can submit an application online or contact the surety to receive a quote. The surety will use your business information, personal financial background and other relevant factors to determine how much you will pay in premiums over the two-year period that the bond is valid. Decisions are typically made in as little as 1-2 business days.