Is Contractors Liability Insurance The Same As A License Bond in California?
Contractors liability insurance and a contractors bond are two separate things in California although the companies who write bonds also sell contractors liability insurance. Contractors bonding and insurance explained is simple; with a contractors bond, the liability to cover losses and defective workmanship is the contractors.
With contractors liability insurance, the liability to cover losses rests with the insurance company. It could be said that bonding is a form of cheap insurance although this is not technically true. Contractors bonding is really is a credit relationship between the bonding company and the contractor.
The most important thing to remember in contractors bonding and insurance explained is that the bond does not relieve the contractor of his or her obligation in the event of a claim from a customer or an employee claiming back wages. The bond simply exists to pay these claims in the event the contractor does not. The contractor is still financially obligated to the bond company. The bond is not insurance, the bond company is taking a risk on the contractor being able to pay their obligations.
A contractors bond in the amount of $12,500 is required for all licensed California contractors. Liability insurance is not mandatory but highly recommended. Most insurance companies serving California contractors will offer a get quote here button for quotes on the mandatory bond.