February 11, 2021

Maryland Home Improvement Contractor Bond: A Comprehensive Guide

This guide provides information for insurance agents to help Home Improvement Contractors on Maryland Home Improvement Contractor Bonds

At a Glance:

• Lowest Cost: $360 for a 2-year term or $18 per month, based on the contractor’s credit
• Bond Amount: $20,000
• Who Needs It: All individuals and business entities seeking to obtain a Home Improvement Contractor License in the State of Maryland and who do not meet the financial solvency requirements set forth by the Maryland Home Improvement Commission
• Purpose: To ensure the public will receive compensation for any damages should the contractor fail to comply with contractor licensing law
• Who Regulates Home Improvement Contractor Bonds in Maryland: The Maryland Home Improvement Guarantee Fund (MHIGF)

Background

Maryland Statute 09.08.01.03 requires home improvement contractors operating in the state to obtain a  license with the Maryland Home Improvement Commission. The Maryland legislature enacted licensing laws and regulations to ensure that contractors engage in ethical business practices. In order to provide financial security for the enforcement of the license law, contractors who do not meet the commission’s financial solvency requirements must obtain an indemnitor or purchase and maintain a $20,000 home improvement contractor surety bond to be eligible for licensure.

What is the Purpose of the Maryland Home Improvement Contractor Bond?

Maryland requires contractors to purchase the Home Improvement Contractor Bond as part of the application process to obtain a home improvement contractor license. The bond ensures that the public will receive compensation for financial harm if the contractor fails to comply with the licensing law. In short, the bond is a type of insurance that protects the public if the contractor breaks licensing law.

How Can an Insurance Agent Obtain a Maryland Home Improvement Contractor Surety Bond?

BondExchange makes obtaining a Maryland Home Improvement Contractor 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? Gain access 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.

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Who is Required to Purchase the Bond?

Maryland requires home improvement contractors to have a personal net worth (assets minus liabilities) of at least $20,000. The MHIGF guarantees payment of up to $20,000 for all consumers who are defrauded by home improvement contractors. Contractors who do not meet the net worth requirement must purchase a $20,000 Home Improvement Contractor bond to be eligible for licensure.

Is a Credit Check Required for the Maryland Home Improvement Contractor Bond?

Surety companies will run a credit check on the contractor to determine eligibility and pricing for the Maryland Home Improvement Contractor 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 Maryland Home Improvement Contractor Bond Cost?

The Maryland Home Improvement Contractor Surety Bond can cost anywhere between $360 to $2,000 for a two-year term or $18 to $100 per month. 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 $20,000 bond requirement.

$20,000 Home Improvement Contractor 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 Maryland Define “Home Improvement Contractor”?

To paraphrase Maryland Code Business Regulation 8–101(g)(1), a home improvement contractor is any individual or business entity who alters, converts, improves, modernizes, remodels, repairs, or replacements a building or part of a building.

BondExchange now offers monthly pay-as-you-go subscriptions for surety bonds. Your customers are able to purchase their bonds on a monthly basis and cancel them anytime. Learn more here.

How Do Home Improvement Contractors Apply for a License in Maryland?

Contractors in Maryland must navigate several steps to secure their home improvement contractor license. Below are the general guidelines, but contractors should refer to the application checklist for details on the process.

License Period – The Maryland home improvement contractor license is valid for two years from the date of issuance and must be renewed prior to the expiration date

Step 1 – Meet the Experience Requirements

Contractors must obtain two years of work or educational experience in a field related to home improvement contracting prior to applying for a license

Step 2 – Pass the Exam

Before applying for a license, contractors must pass the licensing examination with a score of at least 70%.

• • Contact PSI at www.psiexams.com or (800) 733-9267 to obtain the candidate information bulletin.
  • Submit the examination registration form for the home improvement examination to PSI with a check in the amount of $63.00

Step 3 – Purchase Insurance

Contractors must purchase liability insurance with a minimum limit of $50,000.

Step 4 –  Purchase a Surety Bond

Contractors who do not meet the requirement financial solvency requirements ($20,000 personal net worth) must purchase and maintain a $20,000 home improvement contractor surety bond

Step 5 –  Complete the application

All home improvement contractor regulatory license applications should be mailed to the following address:

OCCUPATIONAL AND PROFESSIONAL LICENSING
Maryland Home Improvement Commission
500 N. Calvert Street, 306
Baltimore, MD 21201

Completed license applications will contain the following information:

• • Contractor’s Information
    • Name
    • Home Address
    • Home Phone number
    • Fax Number
    • DOB
    • Place of Birth
    • SSN
    • DLN
    • E-mail address
  • Business Information
    • Business Name
    • Business Address
    • Business Telephone Number
    • Fax Number
    • Email Address
    • Business Type
      • Sole Proprietor
      • Corporation
      • LLC
      • Partnership
    • FEIN
  • Estimated Gross Profit Per Year
  • Average Estimated Profit Per Individual Contract
  • What Type of Home Improvements?
  • Insurance Information
    • Name of the insurance carrier
    • Amount of the coverage
    • Expiration Date
    • Agent
    • Agent’s Address
    • Policy number of the Contractor’s general liability insurance policy
  • Questionnaire
  • Co-Owner Information
  • Financial Statement Page
  • Signature

Step 6 – Pay the Appropriate Fees

All fees can be paid online here. The following fees must be paid when applying for the home improvement contractor license:

• • $63.00 – Exam Fee
  • $370.00 – License Application Fee
  • $250.00  – License Fee
  • $100.00 – Guarantee Fund Assessment
  • $20.00 – Processing Fee

How Do Maryland Home Improvement Contractors Renew Their License?

Contractors can renew their license online through Maryland’s online renewal portal. The Maryland home improvement contractor license is valid for two years from the date of issuance and must be renewed prior to the expiration date.

What Are the Insurance Requirements for the Maryland Home Improvement Contractor License?

The State of Maryland requires home improvement contractors to obtain general liability insurance with a minimum limit of $50,000. In addition, contractors who do not meet the requirement financial solvency requirements ($20,000 personal net worth) must purchase and maintain a $20,000 home improvement contractor surety bond

How Do Maryland Contractors File Their Bond With The Maryland MHIGF?

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

OCCUPATIONAL AND PROFESSIONAL LICENSING
Maryland Home Improvement Commission
500 N. Calvert Street, 306
Baltimore, MD 21201

The Home Improvement Contractor surety bond requires signatures from both the surety company 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
• Bond Term
• Date the bond is signed

How Can Maryland Home Improvement Contractors Avoid Bond Claims?

To avoid claims on the Maryland Home Improvement Contractor Bond, contractors must follow all licensing regulations, including some of the most important issues below that tend to cause claims.

• Do not engage in any acts of fraud
• Honor all contractual agreements

What Other Insurance Products Can Agents Offer Home Improvement Contractors in Maryland?

Maryland requires home improvement contractors to obtain liability 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 Maryland Home Improvement Contractor Customers?

Maryland conveniently provides a public database to search for active Home Improvement 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.