Contractors License Bonds
The California Contractors License Board (CSLB) requires all licensed contractors in California to post a bond for their contract projects that are over $500 total including labor and material. This is to ensure that all California licensed contractors comply with the Contractor’s State License Law, which outlines the violations that the bond covers. You can not get your license number issued with the California state license board until the bond has been purchased and proof of coverage has been sent. They will also require a certificate of Workers Compensation coverage or an exempt filing if you have no employees.
Customers, suppliers and employees of the contractor are able to file claim against the bond if a contractor does not comply with the outlined conditions. Surety contracts or bonds are not like traditional insurance. If a claim is filed against a bond and the bond Company pays, the bond Company will seek reimbursement from you to pay them back. To ensure that you are able to do so they require a soft credit check. Sometimes business and personal financials are required for certain types of bonds.
Visit the Contractors State License Board for more information.