General Contractor Bond Requirements in Washington State

If you want to work as a contractor in Washington State, you need a contractor bond before you can register with the Department of Labor & Industries (L&I). This is not optional. Without an active bond on file, you cannot legally perform construction work in Washington, and operating without one exposes you to fines, penalties, and potential legal action.

A contractor bond is one of the most misunderstood requirements in the construction industry. Many contractors confuse it with insurance, assume it protects them, or do not realize that a bond claim creates a personal debt they must repay. This guide explains exactly what a contractor bond is, what Washington requires, what it costs, how to get one, and how to keep it active.

What Is a Contractor's Bond?

A contractor's bond is a surety bond, which is a financial guarantee to consumers that you will fulfill your contractual obligations. It is not insurance. Insurance protects you. A bond protects the public.

Every surety bond involves three parties:

• Principal (you): The contractor who purchases the bond and is required to comply with its terms
• Obligee (the state): The entity requiring the bond, in this case the Washington Department of Labor & Industries, acting on behalf of consumers
• Surety (the bonding company): The company that issues the bond and guarantees payment to consumers if a valid claim is filed

Here is the key distinction that every contractor must understand: if a consumer files a valid claim against your bond and the surety pays that claim, you are legally obligated to reimburse the surety company for the full amount paid, plus any legal and administrative costs. A bond is essentially a line of credit backed by your personal guarantee. The surety fronts the money to the consumer, and then you owe the surety.

This is fundamentally different from insurance, where the insurer pays claims and you owe nothing beyond your premium and deductible.

Washington State Bond Requirements

Washington requires a $12,000 surety bond for general contractors and most specialty contractors. This requirement applies to virtually anyone who performs construction, alteration, repair, or improvement work on buildings, roads, or other structures in the state.

Key facts about the Washington contractor bond requirement:

• Bond amount: $12,000 for general contractors and specialty contractors
• Required for registration: You cannot complete your L&I contractor registration without providing proof of an active bond
• Continuous maintenance required: Your bond must remain active for the entire duration of your contractor registration. If your bond lapses, your registration is automatically suspended, and you cannot legally work until the bond is reinstated
• Applies broadly: The requirement applies to general contractors, subcontractors, and most specialty trades, including electrical, plumbing, HVAC, roofing, painting, landscaping, and many others
• Sole proprietors included: Even if you have no employees and work entirely by yourself, you still need a bond to register as a contractor

Washington accepts several forms of bond:

• Surety bond: The most common option. A licensed surety company issues the bond on your behalf. You pay an annual premium, and the surety guarantees the $12,000 obligation.
• Cash deposit: You can deposit $12,000 in cash with L&I instead of purchasing a surety bond. The money is held as security and returned when you close your registration, provided no claims are pending. Most contractors prefer the surety bond option because it does not tie up capital.
• Assigned savings account: You can assign a savings account with at least $12,000 to L&I. The funds remain in your account but are pledged as security.
• Irrevocable letter of credit: A bank issues a letter of credit in favor of L&I for the bond amount.

For the vast majority of contractors, purchasing a surety bond is the most practical and cost-effective option.

How Much Does a Contractor Bond Cost in Washington?

The cost of a contractor bond is a fraction of the bond amount. You do not pay the full $12,000. Instead, you pay an annual premium based on a percentage of the bond amount.

Typical costs:

• Good credit (680+): 1-2% of the bond amount, or approximately $120 to $240 per year
• Average credit (600-679): 2-4% of the bond amount, or approximately $240 to $480 per year
• Poor credit (below 600): 5-15% of the bond amount, or approximately $600 to $1,800 per year

Several factors influence your bond premium:

• Personal credit score: This is the single biggest factor. Surety companies view your credit score as an indicator of financial responsibility. Higher credit scores earn lower premiums.
• Business experience: Contractors with several years of experience and a track record of successful projects may qualify for better rates.
• Claims history: Any previous bond claims or legal judgments related to your contracting work will increase your premium significantly.
• Financial statements: For larger bond amounts or contractors with marginal credit, the surety may request financial statements or tax returns.

Bad credit options: If your credit score is below 600, you can still get bonded, but expect to pay higher premiums. Some surety companies specialize in high-risk bonds and will work with contractors who have credit challenges. In some cases, you may be required to provide collateral or a co-signer. Alternatively, you can use the cash deposit option with L&I to avoid the credit-based underwriting process entirely.

How to Get a Contractor Bond

Getting a contractor bond in Washington is a straightforward process that can often be completed in a single day.

Step 1: Gather your information. You will need your full legal name and business name, Social Security number or FEIN (Federal Employer Identification Number), business address, contact information, and your UBI (Unified Business Identifier) number if you already have one.

Step 2: Apply with a surety bond provider. You can apply through an insurance agency that handles surety bonds, such as SmartInsured, or directly through a surety company. The application typically asks for basic personal and business information and authorizes a credit check.

Step 3: Receive your quote and pay. Once the surety reviews your application and credit, they will provide a premium quote. If you accept, you pay the premium and any applicable fees.

Step 4: Receive your bond. The surety issues the bond document, which you then submit to L&I as part of your contractor registration. Many surety companies file the bond electronically with L&I on your behalf.

Step 5: Complete your L&I registration. With your bond on file, you can complete your contractor registration, which also requires proof of liability insurance (or an exemption) and payment of the registration fee.

Timeline: Many contractors receive their bond the same day they apply. For applicants with good credit and straightforward applications, the process can take as little as a few hours. Applicants with credit issues or complex business structures may take one to three business days.

Bond vs. Insurance: Key Differences

Contractors in Washington need both a bond and insurance, but these serve entirely different purposes. Confusing the two can lead to costly misunderstandings.

• Who is protected: A bond protects consumers and the public. Insurance protects you, the contractor.
• Who pays claims: When a bond claim is paid, the surety pays the consumer, and then you must reimburse the surety. When an insurance claim is paid, the insurance company pays the claim, and you owe nothing beyond your deductible.
• Purpose: A bond guarantees that you will fulfill your obligations. Insurance compensates for unexpected losses.
• Requirement: Washington requires a $12,000 contractor bond for registration. General liability insurance is required by most clients, general contractors, and many permit-issuing authorities, though not technically mandated by state law for all contractors.
• Cost structure: Bond premiums are based primarily on your credit score. Insurance premiums are based on your trade, revenue, claims history, and number of employees.

Both are essential for operating a legitimate contracting business in Washington. The bond gets you registered with L&I. Insurance protects your business from financial ruin when accidents happen.

What Triggers a Bond Claim?

Consumers can file a claim against your contractor bond through L&I when they believe you have failed to meet your obligations. Common triggers include:

• Failure to complete contracted work: You accepted payment for a project and did not finish it, or abandoned the job without justification.
• Substandard workmanship: The work you performed does not meet the standards specified in the contract or applicable building codes, and you have refused to correct it.
• Property damage during construction: You damaged the customer's property during the course of your work and have not made it right.
• Failure to pay subcontractors or suppliers: Subcontractors or material suppliers who were not paid for work or materials provided on your projects can file claims against your bond.
• Violation of contract terms: You breached the terms of your written agreement with the consumer.

The consumer complaint process: A consumer who has a dispute with a contractor can file a complaint with L&I. L&I investigates the complaint, and if the complaint has merit, a claim can be made against your bond. The surety company then investigates the claim and, if valid, pays the consumer up to the $12,000 bond limit. You are then responsible for repaying the surety.

It is worth noting that the $12,000 bond is a relatively small amount. A single claim can exhaust the entire bond, leaving no coverage for subsequent claims until the bond is replenished. This is another reason why carrying adequate general liability insurance alongside your bond is essential. Insurance covers much larger losses and does not create a repayment obligation.

Keep Your Bond Active and Your Registration Current

Your contractor bond must remain active for as long as you hold a Washington contractor registration. If your bond expires or is canceled, L&I will suspend your registration, and you will be unable to legally perform any construction work until the bond is reinstated. Working without an active registration can result in fines of up to $5,000 for a first offense, and penalties increase for repeat violations.

Renewal: Most contractor bonds are issued on an annual basis. Your surety company will send renewal notices before the bond expires. Do not ignore these notices. Set a calendar reminder to ensure your bond is renewed well before the expiration date.

Cancellation: If you switch surety companies, make sure your new bond is in place and filed with L&I before the old bond is canceled. Any gap in bond coverage will trigger a registration suspension.

SmartInsured helps Washington contractors get bonded quickly and affordably. Whether you are registering for the first time or need to renew or replace an existing bond, we can walk you through the process and get your bond filed with L&I.

Get bonded today by visiting our quote form or calling us at 425-209-1206. Most contractors can have their bond issued the same day. We work with multiple surety companies to find competitive rates regardless of your credit situation.

Your bond is the foundation of your legal right to work as a contractor in Washington. Keep it active, keep it current, and build your business on solid ground.