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Plumbing contractor license and permit bonds
A license and permit bond is a surety bond that a state board, county or city may require before you can hold a plumbing license or pull permits. It protects the public and the agency that asks for it, not your shop, and if the surety pays a claim, you pay the surety back.
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What a license and permit bond does for a plumber
A license and permit bond is a written promise that you'll follow the rules tied to your license or permit. A surety company backs that promise. The agency that demands the bond is called the obligee, and it's the party the bond protects, along with the public it serves.
Plumbers run into two flavors. A license bond is filed with a state board or city licensing office before your license or registration is issued. A permit bond is filed with a city or county before it issues a specific permit, such as cutting a street to tie a lateral into the main.
Here's the part that surprises new owners. If someone makes a valid claim, the surety may pay it, and then it sends you the bill. That's why a bond behaves more like a line of credit than an insurance policy.
What a plumbing license bond backs, and what it leaves out
| What it covers | What it usually doesn't |
|---|---|
| Your promise to follow the licensing law the bond was filed under | Water damage from a leak at a customer's house (that's general liability) |
| Valid claims by the obligee, or by the public it protects, up to the bond amount | Any loss to your own business, tools or vans |
| Permit conditions, such as street, curb and utility repairs on a city excavation permit | Injuries to your own techs (that's workers' comp) |
| Fines, fees or costs the specific bond form names | Finishing a contract job or paying your suppliers (that's a performance or payment bond) |
| Claims while the bond is in force and on file | Anything above the bond amount |
| You: whatever the surety pays out, you owe back |
How a license bond plays out on real plumbing work
These are made-up examples to show how the bond works. They aren't real claims.
The bond that expired on September 30
Example scenario: An Illinois shop renews its policies every March and assumes the state bond runs on the same cycle. It doesn't. Illinois ties plumbing contractor registration to a $20,000 bond on the health department's form, and that form says the bond expires September 30 and can't be written as continuous. The owner learns this when the registration renewal comes back incomplete.
Moving into the city
Example scenario: A suburban service shop lands a property manager with buildings inside Chicago. The state bond isn't enough there. Chicago runs its own plumbing licensing, and a Chicago plumbing contractor license calls for a $20,000 bond payable to the city. If the shop also wants to lay sewer drain, a drain layer contractor license needs a $50,000 bond.
The claim that came back to the owner
Example scenario: A homeowner files a claim on a plumber's license bond over a license-law violation. The surety investigates and pays part of it. Two weeks later, the plumber gets a letter asking for that money back under the indemnity agreement he signed when the bond was issued.
Bond amounts and what you'll pay
You don't choose the bond amount. The law or the permit office sets it, and the surety writes to that number. What you pay is a yearly premium, figured as a percentage of the amount.
Published industry data shows that bond premiums generally run 1% to 15% of the bond amount, and 1% to 3.5% for owners with strong credit. On a $20,000 bond, that strong-credit range works out to about $200 to $700 a year. The published median for plumbers buying surety bonds is about $8 a month.
| Coverage | What drives the price | Typical range |
|---|---|---|
| License or permit bond, strong credit | Bond amount, owners' credit, years in business | 1% to 3.5% of the bond amount a year (published industry data) |
| License or permit bond, all credit profiles | Same factors, with more weight on credit | 1% to 15% of the bond amount a year (published industry data) |
| Plumbers' surety bonds, median | Bond type and amount | About $8 a month (published plumber median) |
Your price depends on payroll, revenue, claims history, the work you do and the limits you choose. For a bond, the biggest lever is usually the owners' credit.
How fast can you get bonded? A small license bond is mostly underwritten on credit, so it tends to move much faster than a contract bond, which needs financial statements and a job review. Have your license number, the exact obligee name and the required form ready, and the paperwork is usually the slowest part.
Which plumbers need license and permit bonds most
Every plumber who works where a bond is required needs one. The type of work decides how many you end up carrying.
- Residential service shops usually need only the state or city license bond. In South Carolina, though, a residential specialty contractor needs a surety bond once a single job for a homeowner tops $5,000. See insurance for residential service plumbers.
- Commercial and new construction shops often add city bonds as they chase work in new markets, and later add contract bonds on bigger jobs. See commercial plumbing contractor insurance.
- Drain and sewer contractors carry the most permit bonds, because street and right-of-way work brings its own bond. Metro Nashville, for example, wants a $40,000 permit bond and at least $1 million of general liability from excavation contractors. See drain and sewer contractor insurance.
License bond requirements by state
Bond rules split three ways across the states we're licensed in. Some set a statewide bond, some let you post a bond instead of showing net worth, and many leave bonding to cities and counties.
| State | What we found (check with your board) |
|---|---|
| Arizona | A bond for every license. Specialty commercial amounts scale with yearly volume, from $2,500 up to $50,000. Specialty residential runs $1,000 to $7,500, plus a $200,000 bond or the recovery fund for residential work. |
| California | A $25,000 contractor's bond for every licensee. LLC licensees also file a separate $100,000 bond. |
| Illinois | A $20,000 bond or letter of credit for plumbing contractor registration. Chicago adds its own. |
| Iowa | At least a $5,000 bond for a plumbing contractor license. Contractors based outside Iowa file a $25,000 bond to register. |
| Minnesota | A bond of at least $25,000 to the state for anyone doing plumbing work. |
| New Jersey | A $3,000 bond for a master plumber, kept for each license term. |
| Virginia | Class A and B firms may post a $50,000 bond instead of showing net worth. |
Our research found no statewide plumbing license bond in Texas, Ohio, Georgia, North Carolina or Pennsylvania. Florida doesn't require a general license bond either, and uses a credit-based financial responsibility test instead. Cities and counties in any state can still ask for a permit bond, so call the local permit office before you bid work in a new town.
State details: Arizona, California, Illinois, Iowa, Minnesota and New Jersey. For the rest, see plumber insurance in all 28 states.
Coverages that pair with license bonds
License bond questions
How much is a plumbing license bond?
Does my license bond pay if a customer sues me over a leak?
What's the difference between a license bond and a permit bond?
Do I need a separate bond for every city I work in?
What happens if I let my plumbing bond lapse?
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