In the realm of insurance, there are many types of bonds. To help you navigate which bond is right for you, speak with one of our insurance professionals who will help you understand your options and find the ideal bond according to your needs. Surety bonds are contracts entered into by multiple parties including the obligee, principal, and the surety. One type of surety bond is a lost title bond that guarantees motor vehicle ownership. Contractors may be required to maintain a bond license and permit for various reasons to comply with rules and regulations.
Arizona Contractor Bonds
The Arizona Registrar of Contractors issues licenses requiring bonds in the form of cash, surety, or a bank certificate of deposit. The amount is determined according to the type of contractor license needed and the estimated yearly gross volume. A residential contract bond is either a cash or surety bond that totals $200,000.
These bonds are continuous, without a defined termination or maturity date. Premiums are paid at intervals to maintain them. The Arizona Registrar of Contractors must be notified of the intention to cancel the policy 30 days prior. The bonded contractor will need to replace it in order to avoid having their license suspended. Agencies hold cash bonds for two years after the termination of a license in case any later claims are made.
The following data shows the current classification and contractor license bond schedule that the State of Arizona uses. Some contractors will be licensed for both commercial and residential and simply pay the combined amount.
Residential General Contractors
- If the anticipated gross volume is under $750,000, the bond amount is $9,000.
- If the anticipated gross volume is more than $750,000, the bond amount is $15,000.
Residential Specialty Contractors
- If the anticipated gross volume is under $375,000, the bond amount is $4,250.
- If the anticipated gross volume is more than $375,000, the bond amount is $7,500.
Commercial General Contractors
- If the anticipated gross volume is under $150,000, the bond amount is $5,000.
- If the anticipated gross volume is between $150,000 and $500,000, the bond amount is $15,000.
- If the anticipated gross volume is between $500,000 and one million, the bond amount is $25,000.
- If the anticipated gross volume is between one million and five million, the bond amount is $50,000.
- If the anticipated gross volume is between five million and ten million, the bond amount is $75,000.
- If the anticipated gross volume is more than ten million, the bond amount is $100,000.
Commercial Specialty Contractors
- If the anticipated gross volume is under $150,000, the bond amount is $2,500.
- If the anticipated gross volume is between $150,000 and $500,000, the bond amount is $7,000.
- If the anticipated gross volume is between $500,000 and one million, the bond amount is $17,500.
- If the anticipated gross volume is between one million and five million, the bond amount is $25,000.
- If the anticipated gross volume is between five million and ten million, the bond amount is $37,500.
- If the anticipated gross volume is more than ten million, the bond amount is $50,000.
Arizona Construction Bond Provisions
Bid bonds must be enforced for contractors that are awarded contracts for projects for a city, town, or county. The performance bond amount is equivalent to the full contract amount and protects the public entity that awards the contract. A payment bond is also required that is equivalent to the full amount of the contract. These bonds protect subcontractors and any parties that supply labor or materials.
They must also contain a clause that any party who prevails in judgment will have their attorney fees covered. The bond must be executed from one of the surety companies that hold a proper certificate of authority under Arizona law. Bonds may not be executed by individual sureties. All bonds are maintained on file at the agency that awards the contract.
Arizona Vehicle Registration Bonds
A bond will allow motor vehicles to be registered without sufficient proof of ownership. Arizona seeks to ensure that there are no unknown “security interests in the vehicle.” A bonded certificate of title is needed until sufficient documentation is provided. A bond is required from a surety company or a deposit of cash may be used. The amount of the bond is equivalent to 1.5 times the vehicle’s value according to the state’s assessment.
Why Would You Need a Bonded Title?
An individual may pay for a car and never receive the actual title. A bill of sale alone does not suffice. Perhaps the individual simply has a lost title that was not formally transferred. A bond is maintained to protect any prior lienholder or future buyer of the vehicle. This bond or deposit is necessary for three years unless the vehicle is registered in another state or the title is located.
Motor Carrier Bonds in Arizona
Commercial motor vehicle operators in the state are required to maintain automobile liability coverage. This requirement is a “combined single limit” of $1 million for injuries and property damage. Some motor carriers choose to self-insure or partially self-insure themselves rather than purchase traditional coverage from an insurer. The carrier is required to maintain a bond obtained from a surety company authorized for operation in Arizona.
Other Types of Bonds
There are many licensing and bonding requirements that are required to satisfy government agencies such as:
- Sales tax bonds are required for some businesses to operate in a legal manner in Arizona. They are most commonly a requirement for those who sell products such as fuel, tobacco, and alcohol.
- Some contractors and firms are required to maintain an environmental bond. They are necessary for certain projects and types of work where there is potential for significant damage that is hazardous. Those working with toxic chemicals or highly flammable materials may need to secure the protection that a bond guarantees.
- Car dealers in Arizona may also be required to maintain a bond. This precautionary measure protects the state and clients of the dealership in case the dealer fails to meet their obligations.
Long-Established Independent Insurance Agency in Casa Grande
The Gebhardt Insurance Group is truly a full-service agency that provides insurance and related products for those in Arizona. Our team of local professionals can assist those in need of homeowners, rental, or automobile insurance. In addition, we also provide commercial insurance, life insurance, annuities, and can assist with navigating the bond market. Contact our office today at (520) 836-3244.