Washington Contractor License Bond: A Comprehensive Guide

 

*2SHB 1534 was signed into law in May of 2023 and increases the required limits on all Washington Contractor License bonds. The bill goes into effect on July 1st, 2024. This article has been updated to reflect these changes.

 

This guide provides information for insurance agents to help contractors obtain Washington Contractor License bonds

At a Glance:

• Lowest Cost: $188 per year or $19 per month
• Bond Amount:
  • $30,000 for General Contractors
  • $15,000 for Specialty Contractors
• Who Needs It: All individuals and businesses that act as general or specialty contractors in the State of Washington
• 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 Washington: The Washington Department of Labor and Industries (DOLI)

Background

Washington RCW 18.27.020 requires general and specialty contractors operating in the state to register with the DOLI. The Washington legislature enacted the registration laws and regulations to ensure that contractors engage in ethical business practices. To provide financial security for the enforcement of the registration law, contractors must either obtain an assignment of savings or purchase and maintain either a $30,000 or $6,000 contractor license surety bond to be eligible for registration.

2SHB 1534 dictates that no contractor may apply for registration if they are a successor to a business entity with an unsatisfied final judgment against it. This provision was enacted to prevent contractors that owe money from continuously creating new businesses to keep their registrations intact.

What is the Purpose of the Washington Contractor License Bond?

Washington requires contractors to purchase the Contractor License Bond as part of the application process to register as a contractor. The bond ensures that the public will receive compensation for financial harm if the contractor fails to comply with the registration regulations outlined in Washington RCW 18.27.040. Specifically, the bond protects the public if the contractor fails to pay all employees and suppliers or does not complete all work as specified in the contract. In short, the bond is a type of insurance that protects the public if the contractor breaks registration laws.

How Can an Insurance Agent Obtain a Washington Contractor License Surety Bond?

BondExchange makes obtaining a Washington 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? 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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Is a Credit Check Required for the Washington Contractor License Bond?

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

The Washington Contractor License surety bond can cost anywhere between $75 to $360 per year or $8 to $36 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 for the $12,000 and $6,000 bond requirements.

$30,000 General Contractor Bond Cost

$15,000 Specialty Contractor Bond Cost

*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 Washington Define “General Contractor”?

To paraphrase Washington RCW 18.27.010, a general contractor is any individual or business entity that utilizes more than one building trade per project.

How Does Washington Define “Specialty Contractor”?

To paraphrase Washington RCW 18.27.010, a specialty contractor is any subcontractor who performs specialty work in one building trade.

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 Washington Contractors Complete Their Registration?

Contractors in Washington must navigate several steps to register as a contractor. Below are the general guidelines, but contractors should refer to the DOLI’s Registration Page for details on the process.

*Contractors who perform electrical work may need to obtain a separate license and purchase a $4,000 Electrical/Telecommunications Contractor Bond

Registration Period – Washington contractor registrations are valid for two years from the date of issuance and must be renewed before the expiration date

Step 1 – Determine the Registration Type

Washington requires contractors to obtain specific registrations corresponding to the nature in which the contractor’s business operates. Below are the different types of the Washington Contractor Registration.

• • General Contractor – Utilizes multiple building trades and supervises subcontractors
  • Specialty Contractor – Only performs work in the specialty they are registered in and cannot hire any subcontractors. Contractors can find a complete list of all 63 specialties here.

Step 2 – Register as a Business

Contractors will need to register their business with the Washington Department of Revenue prior to receiving their contractor registration. Contractors seeking to form their business as either a corporation or an LLC will also need to register with the Washington Secretary of State.

Step 3 – Purchase a Surety Bond or Obtain an Assignment of Savings

Contractors must obtain an assignment of savings or purchase and maintain a contractor license surety bond in the following amounts:

• • $30,000 for General Contractors
  • $15,000 for Specialty Contractors

Step 4 – Purchase Insurance

All contractors must purchase and maintain public liability insurance with the following minimum limits:

• • $200,000 public liability
  • $50,000 property damage

Or

• • $250,000 single limit

Step 5 – Complete the Application

 Contractors can submit their application in person at their local L&I office or mail their completed application to the following address:

Contractor Registration
P.O. BOX 44450
Olympia, WA 98504-4450

Contractors must complete the application, including the following steps: 

5.a EIN – Contractors will need to obtain an Employer Identification Number (EIN) and list it on their application. Applicants can obtain an EIN here. Contractors who are sole proprietors without any employees are exempt from this requirement.

5.b Proof of Insurance – Contractors must submit proof of insurance with their application

Step 6 – Pay Fees

All contractors are required to pay a $117.90 application fee when submitting their application

How Does a Washington Contractor Renew Their Registration?

Contractors can renew their registration online through the DOLI’s renewal portal located here. Contractors will need to pay a $117.90 fee when renewing their registration. Washington contractor registrations are valid for two years from the date of issuance and must be renewed before the expiration date.

What Are the Insurance Requirements for Contractors in Washington?

The state of Washington requires contractors to purchase public liability insurance with a minimum limit of $250,000. Contractors must either obtain an assignment of savings or purchase and maintain either a $12,000 or $6,000 contractor license surety bond.

How Do Washington Contractors File Their Bond With The Washington DOLI?

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

Contractor Registration
P.O. BOX 44450
Olympia, WA 98504-4450

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 of the entity/individual(s) buying the bond
• Surety company’s name
• Bond amount
• Date the bond goes into effect

What Can Contractors Do to Avoid Claims Against the Washington 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
• Include your contractor registration number on all advertisements and solicitations
• Pay all required taxes and fees
• Pay employees and subcontractors for work performed
• Pay all suppliers and vendors
• Honor all contractual obligations when completing a job

What Other Insurance Products Can Agents Offer Contractors in Washington?

Washington requires contractors to obtain public 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 Washington Contractor Customers?

Washington 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.

What other Contractor License Bonds are Required in Washington?

Contractors in Washington will need to obtain specific bonds correlating with their registration type. Contractors seeking to receive an electrical or telecommunications contractor license will need to purchase a $4,000 Electrical/Telecommunications Contractor Bond.