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How to get bonded and insured as a plumber
Getting bonded and insured as a plumber means two separate buys. A bond backs your promise to the state or your customer, and you repay the surety if it pays a claim; insurance protects your own business. Most shops file a license bond first, then line up general liability, commercial auto and workers' comp before the first job.
Key takeaways
- Bonded and insured are two different things. A bond protects your customer or the state, and you pay the surety back for any claim it pays. Insurance protects your business and usually doesn't ask for the money back.
- Most plumbers start with a license bond. Some states set the amount by law, such as $25,000 in California and Minnesota. Business service bonds and performance and payment bonds come later as you grow.
- A bond costs a slice of its face amount each year. Surety agencies often quote about 1% to 3% of the bond amount for owners with good credit, and more with weak credit.
- The insured side is usually three policies: general liability, commercial auto and, once you hire, workers' comp.
- Proof is two documents: the bond filed with the board or city, and a certificate of insurance from your agent.
What bonded and insured means for a plumbing contractor
A bond is a promise. Insurance is protection. That's the whole split, and it matters most on the day a claim lands.
A surety bond has three parties. You are the principal. The state, city or project owner who demands the bond is the obligee. The surety is the company that backs your promise to follow the license law or finish the job.
If you break that promise, the obligee can file a claim on the bond. The surety may pay it, and then it comes to you for the money. Before any bond is issued, you sign an indemnity agreement, which is your written promise to repay the surety for claims, legal fees and costs.
Insurance works the other way. If a compression fitting you set lets go behind a finished wall, your general liability policy may pay for the water damage, subject to your deductible and the policy wording. The carrier typically doesn't send you a bill for what it paid.
So a bond acts more like credit than coverage. It tells your customer that someone stands behind your promise. It does not stand behind you.
Which bonds plumbers commonly need
Most plumbers start with a license bond. Service bonds and contract bonds come later, as you hire techs and bid bigger work.
License and permit bonds
A license and permit bond, also called a contractor license bond, is the one a board or city makes you file before you can work or pull permits. The amount is set by law or by the city, not by you. Two examples from states we're licensed in:
- California: every CSLB licensee files a $25,000 contractor's bond. It's there for consumers hurt by defective work or license-law violations, and for workers owed wages. See California plumber insurance.
- Minnesota: anyone who performs plumbing work must keep a bond of at least $25,000 to the state. See Minnesota plumber insurance.
Plenty of states set no state-level bond and leave it to cities. Many cities want a permit bond before they'll issue certain permits, such as street openings for a sewer lateral tie-in. Ask your state board and your local building department what applies to you. Our plumbing license and permit bonds page covers the details.
Business service bonds
A business service bond protects your customers from employee theft, such as a tech who walks off with jewelry from a bathroom remodel. It's rarely required by law. Plumbers usually buy it because property managers and homeowners like to see it. Bond terms set what proof is needed before a claim is paid, so read yours. More on business service bonds for plumbers.
Performance and payment bonds
These show up with your first public bid or your first big GC contract. A performance bond backs your promise to finish the job. A payment bond backs your promise to pay your subcontractors and suppliers. Some owners also want a bid bond, which backs your promise to sign the contract if you win it.
On federal work, the Miller Act rules apply. Under the federal acquisition rules, construction contracts over $150,000 need both bonds, each for 100% of the contract price. Most states have their own version for state and local public work.
Contract bonds take more underwriting. The surety looks at your financial statements, your work in progress and your track record. Then it sets how much work it will bond at once, often called your bonding capacity. See performance and payment bonds for plumbers.
How to get bonded: the steps for a license bond
For a small license bond, getting bonded is a short application, a credit check and a signature. Many are issued quickly once the surety has a complete application.
- Find your number. Ask your state board and your city which bond you need and how much it must be.
- Apply. Give your business name exactly as it appears on your license, your license number and the owners' details.
- Credit review. The surety's underwriter pulls credit on the owners. A stronger credit score usually means a lower rate.
- Sign the indemnity agreement. Many sureties ask a spouse to sign too. Read it before you sign, because your personal assets can be on the hook.
- Pay and file. You pay the premium, the surety issues the bond, and you file it with the board or city. Keep a copy and note the renewal date.
When the bonding gets bigger
Performance and payment bonds take longer than a license bond, since the surety reviews the job and your books. If public work is in your plans, start talking to a surety well before the bid date.
The SBA says a surety will judge your credit and your capacity to do the work, plus your character. Clean books, steady jobs and a few years of history all count. A bonding line tends to grow as your shop grows, so the first small bonded job is often the start of a bigger one.
If no surety will bond you yet, the SBA Surety Bond Guarantee program may help. It backs bonds on contracts up to $9 million for non-federal work and up to $14 million for federal work. The SBA charges a fee of 0.6% of the contract price on performance and payment bonds, and no fee on bid bonds.
What it costs to get bonded
You don't pay the face amount of the bond. You pay a yearly premium, which is a small percent of it.
| Item | What drives the price | Typical range |
|---|---|---|
| License bond, good credit | Owners' credit, years in business, bond type, state | About 1% to 3% of the bond amount per year |
| License bond, weaker credit | Same factors, with more weight on credit | Often 5% to 10% of the bond amount per year |
| SBA guarantee fee (performance and payment bonds) | Contract price | 0.6% of the contract price, paid to the SBA |
Example scenario: a plumber in a state with a $25,000 license bond has strong credit. At 1% to 3%, the bond would run about $250 to $750 a year. With poor credit at 5% to 10%, the same bond could cost $1,250 to $2,500 a year.
Most license bonds renew every year, and you owe the premium again each time. Your rate depends on your credit, your history, the bond type and your state. For the whole startup picture, see how to start a plumbing business: licenses, insurance and bonds.
The insured side: general liability, auto and workers' comp
Most plumbing shops need three policies to be fully bonded and insured. Some boards won't license you without proof of the first one.
General liability
General liability insurance may pay for damage or injury you cause to other people, within your limits. That usually includes damage from finished work, which insurers call completed operations: damage that shows up after you've packed up and left. Some states set a minimum:
- Ohio requires licensed plumbing contractors to carry contractor liability insurance, including completed operations, of at least $500,000. See Ohio plumber insurance.
- Minnesota requires plumbing contractors to carry liability coverage of at least $50,000 per person and $100,000 per occurrence, plus $10,000 for property damage, and to file a certificate with the state.
Those are floors, not targets. GCs and property managers often ask for more.
Commercial auto
Commercial auto covers the service van. If a vehicle is owned by the business, a personal auto policy typically won't cover it. Personal policies also tend to carry lower liability limits than many GCs will accept. More on commercial auto insurance for plumbers.
Workers' comp
Workers' comp pays medical bills and lost wages when a tech gets hurt on the job, depending on your state's rules. Most states require it once you have employees. Texas is the outlier: private employers there may choose not to carry it. Check with your state's workers' comp agency, and see workers' comp for plumbers.
Line up these policies before the first job, not after a GC calls asking for a certificate. As you add a second truck, a few techs or sewer work, shops often add tools coverage, an umbrella and pollution coverage. Your price depends on payroll, revenue, claims history, the work you do and the limits you choose.
How to prove you're bonded and insured
Proof comes in two parts. Your bond is filed with the board or city, and your insurance shows up on a certificate of insurance, or COI.
For the bond, the obligee keeps the filed original. Ask the board how to confirm it's on file, and keep your own copy with the renewal date.
For insurance, your agent issues a COI, usually on the ACORD 25 form. It lists your policies, limits and policy dates. The form itself says it is for information only and does not change, extend or add to your coverage.
That matters when a GC asks to be named as an additional insured. A line typed on the certificate isn't enough. The policy needs an endorsement that adds them. Our guide to certificates of insurance and additional insured walks through what GCs ask for.
Frequently asked questions
Is bonded the same as insured?
Does a $25,000 bond cost $25,000?
Can I get bonded with bad credit?
How long does it take to get bonded?
Do I need to be bonded to be a plumber?
The short version
Find the bond your state and city require, apply with a surety, sign the indemnity agreement and file the bond. Then put general liability, commercial auto and, once you hire, workers' comp in place before the first job.
Treat the bond as a promise you'll keep, not coverage you can lean on. Treat insurance as the part that may pay when a fitting fails. Renew both every year, and revisit them when you add a truck, a tech or your first bonded contract. When you're ready to see options from the carriers we work with, request a free, no-obligation quote.
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