Get Bonded And Insured In Ohio: A Step-By-Step Guide

If you're starting a business in Ohio, it's important to understand the requirements for bonding and insurance. Bonding provides protection to the public and ensures that businesses fulfil their obligations, while insurance safeguards your company from financial losses. In Ohio, certain businesses, particularly construction companies, are required by law to be both bonded and insured. The process for obtaining bonding and insurance can be complex, and it's important to understand the different types of bonds and insurance policies available.

Ohio contractor license bonds

In Ohio, there is no statewide licensing requirement for contractors, and there is also no statewide surety bond requirement. However, many counties and cities have their own rules and regulations, and contractors may need a license and a surety bond to work legally in these areas.

An Ohio contractor license bond is a type of surety bond that offers security to customers of contractors. This bond ensures that compensation will be paid if a customer suffers financial loss due to a contractor's negligence or fraudulent activities on a project.

An Ohio contractor license bond is a three-party contractual relationship:

• The obligee: the state or local licensing authority that requires the bond be posted by the contractor.
• The principal: the contractor required to secure the bond to get licensed and legally work in the state.
• The surety company: the company that gives the bond to the contractor and pays the claim if a successful claim is made by a customer. The contractor must then repay the claim to the surety company.

Obligee Details for an Ohio Contractor License Bond

Contractors working in Ohio receive licensing guidelines and requirements from local authorities. The obligee of an Ohio contractor license bond is the city or county office responsible for issuing licensing and mandating surety bonds.

Commercial contractors in certain fields must get an Ohio contractor license bond to comply with state laws. In these cases, the Ohio Construction Industry Licensing Board (OCILB), operating under the state's Department of Commerce, acts as the obligee for contractor bonds.

Who Is Required to Get an Ohio Contractor License Bond?

Each jurisdiction varies in terms of which contractors must get licensed or secure an Ohio contractor license bond. At the state level, contractors who work in the following areas of expertise on a commercial level are required to have a valid license and a license bond to work legally:

• Electrical contractors
• Hydronics contractors
• Plumbing contractors
• Refrigeration contractors

How to Get an Ohio Contractor License Bond

Obtaining an Ohio contractor license bond is a straightforward process:

• Apply through a brief online form.
• The surety company reviews your application details to determine your approval and bond premium.
• Complete the bonding process once this premium is paid.

Each county or city requiring a licensed contractor to post a bond has its own requirements for how much of a bond is necessary. The total bond amount needed can range from $5,000 up to $50,000 in many areas of Ohio, but contractors are not responsible for paying this entire amount.

The surety company determines the bond premium, or percentage of the total bond amount, that a contractor must pay to post a bond. An Ohio contractor license bond premium varies from one person to the next, as rates are based on personal credit score and business financial standing.

A low credit score does not necessarily mean you cannot obtain an Ohio contractor license bond, but it does mean that the bond premium you pay will be higher compared to a contractor with a strong credit score.

Renewal Process and Expiration Date for Contractor Bonds in Ohio

Because contractor licenses are issued by various local agencies, there is no set expiration date or renewal term. If an Ohio contractor license bond is required, then the expiration date is often the same as that of the contractor's license. When it comes time for renewal, the surety company that issued the bond will send information about the renewal process.

How to get a surety bond

A surety bond is a way of ensuring that a business completes the work it was hired to do. If it doesn't, the bond's guarantor is financially liable to the customer.

Determine the surety bond you need:

Contact cities and counties directly to find out which bond you'll need to work as a contractor. For example, in Ohio, Cleveland lists its requirements online, and you can download the registration form directly from the city.

Apply for your surety bond:

You can apply for your surety bond with a company that offers them. They will need some information about you and your business. Although you may need multiple bonds for different cities, you can use the same application form each time.

Get a bond quote:

Typically, companies can provide you with a quote immediately. However, in some cases, it may take up to 24 hours to process your application.

Buy your bond:

Once you pay the bond premium, you're officially bonded. Most bonds last up to 12 months, but some may be valid for different periods.

Provide proof of bond coverage:

Give a proof-of-bond-coverage document to the relevant licensing board.

Renew your bond:

Lapses in bond coverage can put a contractor's license status in question and could lead to fines and penalties. Therefore, it's vital to keep the required surety bond active and in good standing at all times, including renewing it annually (bond coverage expires after 12 months).

Improve your credit score:

Upon renewal, the surety will perform another credit check and revise the bond price up or down depending on credit changes. One way to manage bond costs long-term is by steadily improving your credit score.

General liability insurance

The cost of general liability insurance is based on your specific business needs and the risks involved. For example, a small business with a physical location where customers visit will likely need this type of insurance.

Business insurance

Types of Business Insurance

• General Liability Insurance: This type of insurance safeguards your business in the event of property damage or third-party injuries for which your company is deemed responsible. It assists in covering the costs of medical treatment, repair, and replacement for property damage. In Ohio, general liability insurance is mandated for contractors, with minimum coverage requirements varying by municipality, typically starting at $100,000.
• Workers' Compensation Insurance: In Ohio, this insurance is legally required for all employers with one or more employees. It provides coverage for medical expenses and lost wages of employees who suffer work-related injuries or illnesses.
• Tools and Equipment Insurance: This type of insurance is designed to protect your tools and equipment from damage or theft. It covers power tools, hand tools, and machinery, helping you recover the costs of replacing or repairing stolen or damaged equipment.
• Commercial Property Insurance: This insurance covers damage or loss to buildings, structures, and other property owned or rented by the contractor. It allows businesses to recover repair or replacement costs, ensuring uninterrupted operations.
• Commercial Auto Insurance: In Ohio, carrying auto insurance is mandatory for all motor vehicles. Business owners need commercial auto insurance for vehicles owned by the company, providing protection in case of accidents or injuries involving the insured or their employees.
• Other Types of Insurance: Depending on your business's specific needs, you may also consider additional types of insurance, such as cyber liability coverage, employers practices liability insurance, and more.

Obtaining Business Insurance in Ohio

When seeking business insurance in Ohio, you can follow these steps:

• Determine Your Business Needs: Identify the specific insurance types and coverage amounts required for your business. This will depend on factors such as the industry you operate in, the size of your company, and the nature of your operations.
• Shop Around for Insurance Providers: Research and compare different insurance providers in Ohio. Look for companies that specialize in business insurance and have a good reputation. You can request quotes and inquire about their coverage options and rates.
• Provide Necessary Information: When you've identified a suitable insurance provider, you'll need to provide them with detailed information about your business. This includes details such as the nature of your operations, the number of employees, and any specific risks or exposures your business may have.
• Review and Customize Your Policy: Work closely with the insurance provider to tailor the policy to your specific needs. Ensure that you understand the coverage limits, exclusions, and any additional benefits offered.
• Finalise the Policy and Make Payments: Once you're satisfied with the terms and conditions, finalise the insurance policy by agreeing to the premium amount and payment schedule. Stay up to date with your insurance payments to maintain continuous coverage.

Remember that the process of obtaining business insurance may vary slightly between different insurance providers, and it's always a good idea to consult with a qualified insurance broker or agent to ensure you're making the right choices for your business.

Bond insurance

Bonds offer a type of financial guarantee that is often required to secure a contractor license. They are commonly used in construction projects but may be mandatory for other types of businesses as well. There are several types of bonds available, and the one you need will depend on your business' needs.

Other types of small business bonds include:

• License and permit bonds
• Financial guarantee bonds
• Fidelity bonds

Getting bond insurance is crucial for your small business. It not only protects your company but also assures potential customers that you are reliable and trustworthy. Bond insurance can help in various scenarios, such as:

• Accusations of not completing a project
• Accusations of not paying for labour or materials
• Need to replace damaged property
• Lawsuits by customers due to faulty workmanship

Additionally, bond insurance can provide financial protection for accidents, damages to third parties, slander or libel, and employee injuries.

The coverages typically included in small business bond insurance are:

• Property coverage for buildings, structures, business contents, and lost rental income
• In-land marine/equipment/installation floaters covering mobile real property
• General liability, which covers claims for bodily injury or property damage due to negligent acts
• Auto coverage for various on-the-road power units
• Workers' compensation coverage for employee injuries
• Umbrella or excess liability policies, providing additional layers of insurance
• Cyber Liability coverage to protect against data security breaches
• Employers Practices Liability insurance, safeguarding against employment-related legal actions

How to Get Bonded and Insured

The first step in getting bonded is to contact a surety company or agent to request a quote. The surety will review the business owner's personal and business finances before approving them. Once approved, the surety company will provide a bond application to be completed by the business owner and the obligee (the entity requiring the bond, such as a state licensing board).

After the bond is issued, the small business owner pays the premium and signs an indemnity agreement, agreeing to reimburse the surety company for any claims made against the bond.

The application process for a surety bond is similar to obtaining a loan. The bonding firm will want to pre-qualify your company, assessing its character, capacity, and credit. The surety will review the company's files and seek specific information, such as background details, experience, financial statements, and credit history.

Bonding Insurance Cost

The cost of the bond is based on a percentage of the total contract amount and is paid to the surety company by the business owner. The premium for a small business bond typically ranges from $100 to $500 for a $10,000 bond policy. The premium amount is influenced by the business owner's credit score, financial stability, and the type of bond required.

Frequently asked questions