Running the Business · Part 0
The $25,000 bond: what it protects, what it does not, and how it quietly disappears
Every California contractor license needs a $25,000 contractor's bond on file, and many need a second $25,000 bond for the person who qualifies the license. The bond is not insurance for you. It pays the homeowner, the employee, or the state when you break license law, and then the surety comes to you for the money. It is one pool for every job you do, not $25,000 per job, and it can be drained. This lesson covers who can claim against it, what happens the day your surety cancels, the extra $100,000 bond and $1,000,000 insurance policy an LLC must carry, and the cashier's-check alternative that ties up your money for three years.
What the full lesson covers
- The contractor's bond is $25,000 (raised from $15,000 on January 1, 2023). A second $25,000 bond of qualifying individual is required when the qualifier is an RME, or an RMO who owns less than 10 percent of the company.
- The bond protects homeowners, unpaid employees, and anyone defrauded by you. It does not protect you. When the surety pays a claim, you owe the surety.
- $25,000 is the total available across every job for the life of the bond. Claims reduce it, and once it is depleted you must buy a new one to keep the license.
- A cancelled bond suspends the license 30 days after CSLB receives the surety's notice. Working during a bond suspension is unlicensed contracting.
- An LLC license needs two more things a sole owner does not: a $100,000 surety bond for the benefit of employees (B&P 7071.6.5) and liability insurance of at least $1,000,000 (B&P 7071.19).
- A cashier's check can replace the bond, but CSLB holds it for three years after the license ends, and it is exposed to claims the whole time.
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