Tennessee Contractor License Bond

Tennessee licensed contractors may be required to post a surety bond to comply with local or state licensing requirements. A Tennessee contractor license bond ensures that contractors will work ethically and according to current building codes.

Employees and customers of a contractor can make a claim for financial losses against a bond if fraudulent and illegal activities take place.

A Tennessee contractor license bond is a three-party contract.

The Obligee

The obligee is the state or local agency that requires a bond to be obtained.

The Principal

The principal is the contractor who is required to post the bond for licensing purposes.

The Surety

The surety company provides the bond to the principal, and pays claims on the contractor’s behalf. Any valid claims, however, are repaid by the licensed contractors over time.

Not all contractors who are required to have a state license need a bond, but many local jurisdictions in the state require a Tennessee contractor license bond to be in place. When these local licensing requirements are imposed, the bond’s obligee is the local licensing authority in charge of enforcement.

On a state level, a Tennessee contractor license bond is required for certain contractors who plan to bid and work on projects above a certain dollar amount. When this type of bond is needed, the obligee is the Tennessee Department of Commerce and Insurance. The department contact information is as follows:

500 James Robertson Parkway

Nashville, Tennessee 37243

Phone: 615-741-2241

For local licensing authorities, a Tennessee contractor license bond may be required for a variety of contracting work. Plumbers, electricians, mechanical contractors, and HVAC contractors may be required to secure a bond in order to fulfill licensing requirements. When a state license is necessary, the following contractors must also post a Tennessee contractor license bond:

• Building contractors
• Electrical contractors
• Heavy construction contractors
• Roadway contractors
• Masonry contractors
• Specialty contractors

You can start the process of securing your Tennessee contractor license bond by filling out a short application online. After reviewing your credit history and score, as well as other application details, the surety company provides you with a quote for your bond premium.

Several factors play a role in determining the cost of a Tennessee contractor license bond. The first is the bond amount required by the state or local licensing authority. This amount can range from $10,000 to $25,000, but contractors do not have to pay the full bond requirement.

Tennessee contractor license bond costs are calculated as a percentage of the bond total, usually between 1 and 5 percent of the bond requirement. The percentage you pay for a Tennessee contractor license bond also depends on your financial track record.

The surety company issuing your bond evaluates your credit score and history to see if you are low or high risk for future bond claims. High-risk contractors who have a low credit score or adverse credit history may pay between 5 and 10 percent of the bond total.

There is no set expiration date for Tennessee contractor license bonds because contractor licenses vary from one jurisdiction to the next. On a state level, however, licenses are issued for two-year terms, with an expiration date 24 months after the initial license is issued.

The Tennessee contractor license bond has the same date of renewal as your license. Your surety company provides instructions on how to renew the bond so you remain in compliance with licensing regulations.