Maryland Contractor License Bonds

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Who Is Required To Purchase a Maryland Contractor Contractor Bond?

At the state level, the only Home Improvement Contractors are required to purchase a contractor license bond and only if the net-worth requirement of $30,000 can't be met.

This is covered more in the Guaranty Fund section below.

Local Contractor Bond Requirements

From our experience helping hundreds of Maryland contractors, there aren't many local bonding requirements.

The city of Annapolis does have a surety bond requirement for projects that require a grading permit.

The grading permit is typically needed when the project requires:

• Clearing more than 5,000 square feet
• New single family home construction, regardless of area cleared

The bond amount is determined at the time the permits are being issued. There is no set bond amount.

Pulling Local Permits

When you're obtaining permits for contracting jobs in any local county or municipality, you'll be notified of any bonding requirements at that time.

If you're told to purchase a surety bond for any project and you don't see it on our website, request a quote anyway. (You can also call anytime at 1-800-608-9950.) Tell us about the bond you were told to purchase and our bond specialists will help you get the correct bond.

City Commissioned Projects

Projects commissioned by a city agency typically require a "right-of-way" bond.

This is similar to a performance bond. It ensures you will finish the project according to the project and timeline.

The Maryland Contractor Bond Amount

The Maryland Home Improvement Contractor bond amount is $30,000.

$30,000 is also the maximum payout from the Commission's Guaranty Fund.

The Maryland Guaranty Fund

The Commission has a fund called the Guarantee Fund. It's paid into every year by every licensed contractor and available to any customer who has been harmed by a contractor.

Unfortunately, there will always be a small number of licensed contractors who purposefully make decisions to increase profits, financially harming their customers.

These fraudulent actions of misconduct include:

• Breaking the terms of a construction project
• Taking deposits or down payments and never starting or completing a project
• Replacing agreed upon materials with cheaper alternatives to increase profits
• Fail to pay subcontractors for completed work
• Fail to follow building codes and purposefully performing poor quality work

The Guaranty Fund exists to protect the Maryland public from contractors who commit actions like these.

If a contractor is found guilty of any of these acts, the Guaranty Fund will pay for the damages caused, up to the $30,000 limit.

The guilty contractor is responsible for paying the fund back.

This is why the Maryland Home Improvement Commission requires a minimum net-worth of $30,000. They want to make sure a guilty contractor has the means to pay back the fund.

Why is a Maryland Contractor Bond Required?

The Maryland Home Improvement contractor license bond is unique.

While most contractor license bonds are required for the direct protection of a contractors customers, the Home Improvement surety bond is for the protection of the Guaranty Fund.

If you can't meet the $30,000 net-worth requirement, the Commission wants to make sure you can pay the fund back for any potential claims paid out of the fund.

Remember, in the event a bonded contractor is found guilty of harming a customer, the Fund will pay out damages.

The Fund will then make a claim against the contractor surety bond to recoup the money they paid out.

How Much Does a Maryland Contractor License Bond Cost?

The cost of the Maryland contractor license bond is based on a rate quoted by a surety.

A surety is the insurance company that underwrites the surety bond. And like any insurance company, the rates they charge are based on their own internal assessment, typically taking into consideration these three factors:

• Personal credit of the owner or owners
• Contracting experience and industry experience
• Any prior bond claims if you've been licensed in the past

Even though each surety uses these similar factors, the rates they quote will vary.

And because rates vary, the final prices can vary too. Surety agencies like Surety Bonds Direct help customers save hundreds of dollars purchasing a contractor surety bonds.

We use our network of A rated sureties to price shop for you and find you the lowest possible price.

Here is some example pricing so you can see just how big of a difference a percentage point can make on your final price.

Go request your quote so you can get your personalized pricing. Either fill out our free online quote form or you can call a bond specialist at 1-800-608-9950.

What Happens After You Purchase Your Bond?

After you purchase your bond, Surety Bonds Direct's issuing department will prepare your bond with the correct signatures, seals, and the required power of attorney so the Home Improvement Commission is guaranteed to accept your bond.

The Commission allows us to email the bond to you so you can submit a copy. This speeds the process up.

Renewing Your Contractor Bond

Every bond has a term, the amount of time the bond is active. The Maryland Home Improvement bond has a bond term of 2 years from the effective date.

The effective date - your bonds active date - is a date you choose when you purchase your bond.

As your expiration date approaches, your bond specialist will reach out to you 30 to 45 days in advance of your renewal date to make paying the renewal premium easy.

Once you pay the renewal premium, your bond remains active and you will be provided a continuation certificate you can submit to the Commission.

Contractor Bonds And Getting Your Maryland Business License/Registration

If you're applying for your first Home Improvement contractor license, read our post that outlines the steps getting your Maryland Home Improvement contractor license.

At a high level the steps are:

1. Submit your business structure
2. Designate a qualifying individual is required
3. Pass the required exam
4. Complete the application packet
5. Purchase the contractor bond is required
6. Complete a background check