Becoming Bonded And Insured In North Carolina: A Guide

If you're looking to become bonded and insured in North Carolina, you'll need to understand the different types of bonds and how they protect consumers and businesses. A surety bond is a type of financial guarantee that assures specific obligations will be fulfilled, such as meeting contractual commitments, paying debts, or performing certain duties. These bonds are often required by state and federal government agencies to reduce public responsibility for the actions of others. In North Carolina, surety bonds are commonly used in various industries, including construction, automotive, and finance. The cost of surety bonds can vary depending on the type and size of the bond, with premium costs ranging from 1% to 10% of the bond amount. To get bonded, you'll need to determine the specific bond requirements for your industry and location, apply for the bond, and pay the required premium.

Contractor license bonds

The cost of a contractor license bond in North Carolina can range from $2,500 to $130,000, depending on the type of work and location. The bond premium, which is the amount the contractor pays, is typically between 1% and 10% of the total bond amount. The rate is determined by the surety company based on the contractor's personal credit score and business financial strength.

To obtain a contractor license bond in North Carolina, contractors must first determine the amount of bonding they need and then submit an online application. The surety company will evaluate the application and provide a bond premium quote. Once the premium is paid, the bond will be issued.

In terms of licensing requirements, contractors in North Carolina must register a business entity with the NC Secretary of State, obtain an Employer Identification Number (EIN) from the IRS (if necessary), pass any required exams, obtain liability insurance and workers' compensation insurance (if applicable), pass a criminal background check, and submit a contractor license application form.

General contractors in North Carolina are licensed by the North Carolina Licensing Board for General Contractors (NCLBGC) and must obtain a bond in the following amounts:

• $175,000 for a limited license
• $500,000 for an intermediate license
• $1,000,000 for an unlimited license

Electrical contractors are licensed by the Board of Examiners of Electrical Contractors (NCBEEC) and must obtain a bond in the following amounts:

• $50,000 for an intermediate electrical contractor
• $130,000 for an unlimited electrical contractor

Landscape contractors are licensed by the Landscape Contractors’ Licensing Board (NCLCLB) and must obtain a $10,000 surety compliance bond. Irrigation contractors are licensed by the Irrigation Contractors’ Licensing Board (NCICLB) and are also required to obtain a $10,000 bond.

Surety bond costs

The cost of a surety bond in North Carolina varies depending on the type and size of the bond amount. For example, auto dealers in North Carolina must secure a $50,000 bond, which can cost as little as $500. In contrast, a mortgage broker requires a $75,000 bond, which can cost a minimum of $750.

The cost of a surety bond is influenced by factors such as the strength of your business and your credit score. Typically, with a good credit score, you can expect to pay between 1% and 3% of the total bond amount. However, the cost for surety bonds in North Carolina can range between 1% and 10% of the bond amount. Low-risk bonds often have a standard premium, while higher-risk bonds may require underwriting to determine the exact cost.

Some professions that require surety bonds in North Carolina include:

• Freight brokers: $75,000 bond
• Mortgage brokers: $75,000 to $250,000 bond
• Collection agencies: $10,000 to $20,000 bond
• Money transmitters: $150,000 to $250,000 bond
• General contractors: $175,000 to $1,000,000 bond

Additionally, it's important to note that contractor bond amounts can vary based on the size of your business, and certain types of contractors, such as electrical and plumbing, may need to be bonded by local municipalities. As a result, you may need to obtain both a state surety bond and a municipal surety bond, each with different liability amounts.

How to get a surety bond

The process of getting a surety bond in North Carolina is straightforward. Here is a step-by-step guide:

• Determine the Surety Bond You Need:
• Apply for Your Bond:

You can apply for your surety bond online through a licensed surety bond agency or company, such as SuretyBonds.com or Lance Surety Bonds. The application process is typically fast and simple, requiring basic information about your business and the type of bond you need.

Get a Bond Premium Quote:

After submitting your application, you will receive a bond premium quote. In most cases, you can get a quote quickly, but for more complex bonds, it may take up to 24-48 hours. The cost of the bond premium can vary depending on the type and size of the bond, your credit score, and other factors. In North Carolina, surety bond costs often range between 1% and 10% of the bond amount.

Pay the Bond Premium:

Once you receive your quote, pay the bond premium to obtain your surety bond. The bond will typically be emailed to you, and you can request a hard copy if needed.

File Your Bond:

After receiving your surety bond, sign and file it with the obligee. This completes the process of getting bonded in North Carolina.

Remember that surety bonds are required in many business transactions and are often necessary to receive a business license or permit in North Carolina. They protect consumers and government entities from malpractice by guaranteeing that specific obligations will be fulfilled.

Required bonds by profession

In North Carolina, most service providers licensed by the state are required to be bonded. Here are some of the professions that require specific bonds:

Contractors

Contractors in North Carolina must obtain bonds at both the state and city levels. The type of bond and the bond amount vary depending on the type of contractor. For example, general contractors must obtain a license from the North Carolina Licensing Board for General Contractors (NCLBGC) and can choose to post a bond instead of demonstrating working capital. The bond amounts range from $175,000 for a limited license to $1,000,000 for an unlimited license. Electrical contractors must obtain a license and a bond from the State Board of Examiners of Electrical Contractors (NCBEEC). The bond amount, referred to as a "bonding ability statement," is either $50,000 for an intermediate electrical contractor or $130,000 for an unlimited electrical contractor. Landscape contractors are required to obtain a $10,000 surety compliance bond from the North Carolina Landscape Contractors' Licensing Board (NCLCLB). Irrigation contractors must obtain a license from the North Carolina Irrigation Contractors' Licensing Board (NCICLB) and post a $10,000 bond. Additionally, contractors in certain cities, such as Winston-Salem, Greensboro, and High Point, must also post bonds when applying for licenses or permits.

Motor Vehicle Dealers

Motor vehicle dealers who sell five or more vehicles in a year are required to obtain a Motor Vehicle Dealer Bond. Auto dealers specifically must carry a $50,000 bond, and for each additional dealership, they need an extra $25,000 bond.

Insurance Brokers

Insurance brokers in North Carolina are required to post a $15,000 bond before they can start operating. This protects customers from any fraudulent or negligent actions of the broker.

Lottery Retailers

Lottery retailers in North Carolina are typically required to be bonded. The bond ensures that retailers will properly remit payments from lottery ticket sales to the appropriate parties as specified in the contract.

Freight Brokers

Freight brokers need to post a $75,000 bond to legally launch their business.

Mortgage Brokers

Mortgage brokers in North Carolina require a bond ranging from $75,000 to $250,000, depending on the amount of mortgage loans they handle.

Collection Agencies

Collection agencies in North Carolina have varying bond requirements. Domestic and foreign collection agencies need a $10,000 bond, while alien collection agencies require a $20,000 bond.

Money Transmitters

Money transmitters in the state must post a bond ranging from $150,000 to $250,0000, depending on the volume of transmissions they handle.

Bond renewal

Understanding Bond Terms

There are four types of bond terms:

• Fixed Dates: Bonds with clear effective and expiry dates, requiring a new bond for any subsequent period. For example, a bond effective from December 31, 2023, to December 31, 2024.
• Continuous by Certificate: Bonds requiring a continuation certificate to be renewed or extended, typically extending the bond by a year.
• Continuous Until Cancelled: Bonds that remain valid indefinitely until an obligee releases the bond or it is canceled by the surety.
• No Termination or Expiration Date: Bonds that can only be canceled by the obligee when the principal completes their duties outlined in the bond contract. Court bonds typically fall into this category.

The Surety Bond Renewal Process

• Receive Your Expiry Notice: Sureties typically send notices 30 to 90 days before a bond's renewal date. However, if you do not receive a notice, it is still your responsibility to renew on time.
• Contact Your Surety & Fill Out Forms: Expiry notices usually include a free quote for renewal, an invoice link, and any necessary forms. If not, contact your surety to express your intention to renew.
• Submit Renewal Forms and Payment: Send the completed forms and pay the bond renewal premium. Sign and send a new indemnity agreement if your bond underwent any changes.
• Receive Your Surety Bond: Expect to receive a copy of the renewed bond via email within a day or so. A hard copy and any necessary certificates will be sent by mail.
• Submit Proof of Renewal to Obligee: File the new bond with the obligee. For "Continuous by Certificate" bonds, submit the continuation certificate to the obligee. For "Continuous Until Cancelled" bonds, you may receive a verification certificate to submit, but this is often unnecessary.

Requirements for Bond Renewal

You can typically renew your bond online or by phone. If you are changing any information on the bond, such as the amount or language, you may need to provide supporting documentation for the underwriting process, including financial statements.

When to Renew

You can renew your surety bond up to 90 days before it expires, and it is recommended to start the process well in advance to avoid issues. If you do not renew your bond, it will expire, and your surety may issue a notice of cancellation. This can lead to repercussions such as suspension or loss of license, fines, and a lapse in coverage.

Cost of Renewal

The cost to renew a surety bond is often similar to the initial bond cost, provided there are no significant changes to your credit score, housing situation, or required bond amount. Additionally, your previous bond should not have any claims to qualify for the current rate.

Improving Your Renewal Rate

To get a better rate when renewing, work on improving your credit score and financial situation. If your renewal is imminent and these factors have not improved, consider switching to a larger, A-rated surety company, as they may offer more competitive rates.

Frequently asked questions