Updated For 2024: CSLB Bonds and Insurance For California Contractors

The Contractors State License Board (CSLB) can sometimes be vague and confusing about what they require of their contractors – and insurance and bonding is no exception.

This always-changing landscape of protective measures, unpaid principal, and bureaucratic red tape can create a bewildering display of confusing and seemingly contradictory requirements.

When it comes to understanding what bonds and insurance you need to become a CSLB-certified contractor with a contractor’s license, we’ve got you covered. In this article, we’ll take a direct and specific look at contractor bonds and insurance for contractors in California – so you can start your journey to becoming a licensed contractor today.

Understanding Contractor Bonds and Insurance in California

New Bond Limits

As of January 1, 2023, Senate Bill 607 has increased the contractor bond amounts as required by the CSLB for application and/or renewal of your contractor license.

The new rates for CSLB qualifier, license, and minimum disciplinary bonds are now $25,000 – up from previous amounts of $12,500 and $15,000. This is important to note for ALL contractors, especially those whose licenses are up for renewal in the new year.

Bond Providers

A variety of insurance and bond companies offer contractor bonds in California. What you want from these providers is a contractor’s bond or a “surety bond”, which is just the type of bond that a contractor needs.

See our comprehensive guide to bonds for more information – including a full list of bond providers approved by the CSLB.

Bond Validity and Claims

The California Contractors License Bond is valid for one or two years, depending on the bond’s terms. Most people choose two years, as that’s the length of a contractor’s license.

Contractors must maintain an active bond at all times. In the event of a claim against a bond, the surety company investigates and, if valid, pays the claimant up to the bond amount. However, the contractor is responsible for repaying the surety company for any payouts​.

Bond vs. Insurance

It’s important to differentiate between a contractor’s bond and insurance, but they both operate in the same capacity of protecting parties against malfeasance or acts of God.

So what’s the difference? Bonds protect the consumer by ensuring contractors adhere to CSLB rules, while insurance protects your contracting business from financial loss due to liabilities like property damage or bodily injury​.

What Bonds And Insurance Do You Need To Be A Licensed Contractor?

Bonds

• Contractor License Bond: This bond is required for all licensed contractors in California. As of 2023, the bond amount has increased to $25,000​​.
• Qualifying Individual Bond: Required for the qualifying individual of a contracting business, ensuring that this key person complies with all relevant regulations.
• LLC Employee/Worker Bond: For contractors operating as LLCs, a unique $100,000 LLC Employee/Worker Bond is required, offering extra protection for employees and workers.
  • LLCs are also required to have General Liability insurance for their business
• Disciplinary Bond: Required for contractors who have had disciplinary actions against them. This bond is in addition to the contractor license bond.

Insurance

Workers’ Compensation Insurance: Mandatory for all contractors with employees. As per SB216, certain contractor classifications such as Concrete (C-8), HVAC (C-20), Asbestos Abatement (C-22), and Tree Service (D-49) must have workers’ compensation insurance even if they don’t have employees​.

Optional Insurance For Contractors

• General Liability Insurance: Protects contractors from financial losses due to accidents, injuries, and property damage that occur as a result of their business operations. This is highly recommended as anything can happen on a job site.
• Commercial Auto Insurance: For contractors who use vehicles for business purposes. This obviously would cover damages from accidents involving business vehicles.
• Professional Liability Insurance: Also known as errors and omissions or E&O insurance, this covers contractors against claims of negligence, misrepresentation, violation of good faith, and inaccurate advice.
• Builders Risk Insurance: Builder’s risk insurance is similar to general liability insurance but only covers objects or materials – damage to a facade during a remodel, loss of materials and equipment, that kind of thing.

Big Changes To Insurance and Bond Requirements For California Contractors in 2024

A ton has changed for contractors in 2023 and 2024, especially when it comes to insurance. Here’s the biggest changes for contractors in the last 12 months and the next 12 months.

SB216: Workers’ Compensation Insurance Changes for Contractors

• Effective Date: January 1, 2023.
• Impact: The CSLB added four new classifications to the list of classifications that ALWAYS require Workers’ Compensation insurance. In addition to C-39 Roofing, the CSLB now requires applicants and license holders of the following classifications to have workers’ comp, even without employees.
  • Concrete (C-8)
  • Heating, Warm-Air Ventilating, and Air Conditioning (C-20)
  • Asbestos Abatement (C-22)
  • Tree Service (D-49)
• Key Change: Previously, only roofing contractors were mandated to carry workers’ compensation insurance, regardless of having employees or not.
  • NOTE TO ALL CONTRACTORS: This new law dictates that ALL contractors will be required to have Workers’ Comp by 2026.
• Consequences for Non-Compliance: Contractors in these classifications who don’t have workers’ comp risk having their license classifications removed by the CSLB​​. Other classification holders can apply for exemption.

SB607: Increased Bond Amounts and Fee Adjustments

• Effective Date: January 1, 2023.
• Increased Bond Amounts: The bond amount for contractors increased from $12,500 and $15,000 to $25,000.

Do I Need Bonds And Insurance To Be A Contractor?

If you want to be a contractor in California you must, at the very least, have current and valid Contractors Bonds. In many cases, you may need Workers’ Compensation (in 2026, everyone will!), while your business structure, current standing with the CSLB, and experience will affect the additional bonds and insurance you may need.

Our word of advice is you can never be too careful in the construction business – you never know what kind of unexpected cataclysm is right around the corner. We always suggest stumping up for insurance now, so you are covered when it hits the fan.