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License and permit bonds for building design professionals

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License and permit bonds

License and permit bonds guarantee that a business will complete a project in accordance with regulations and industry standards.

Why do building design professionals need a license bond?

The list of requirements you need to become a licensed architect or engineer often includes being bonded. Simply put, being bonded means that your company has bought a surety bond. In this case, it's also called a license bond since it's a bond you need to get licensed.

Each state regulates licenses and bonds for various industries, including building design. You'll need to research the laws in your state to find out whether your business needs to be licensed, bonded, or insured.

A bond provides a guarantee that your company will comply with the regulations and terms outlined in a contract. If something goes wrong, the insurance company will reimburse the client. Unlike insurance, you must then pay that amount back to the insurance company.

The cost of a surety bond is a small percentage of the total bond amount, usually 1% to 5%.

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How do license and permit bonds benefit engineers and other building designers?

Bonds can help your building company get licensed, bid on projects, and provide your clients with peace of mind.

Bonds help you comply with state licensing requirements

State laws might require an engineer or other contractor to carry a bond in order to get a license in their field. If so, it will also specify the size of the bond.

Whether or not you need a license often depends on the type of work you do. For example, most states require licenses and bonds for individuals who design buildings or other structures, or who make changes that could affect the safety of a building.

To get your license, you'll likely need a certain level of education or experience. You may also have to pay a fee and pass an exam.

Bonds guarantee you will comply with regulations and contracts

License bonds and permit bonds guarantee that your company will obey state laws and regulations. Bonds also protect customers from financial losses by providing them with reimbursement if a bonded company breaks the law or the terms of a contract. That's why a client might ask you to purchase a bond before they'll work with your company.

Bonds allow you to bid on projects and do certain types of work

Federal, state, and county regulations may require you to obtain other types of surety bonds for larger projects, or a specific type of work. Your clients might also request bonds.

For example, you might need:

  • A bid bond in order to bid on a project
  • A performance bond to guarantee you will complete a project
  • A payment bond to prove you will pay for all supplies and labor
  • A warranty bond to guarantee the quality of your workmanship and materials
  • A permit bond to do certain types of work, such as replacing a sidewalk

How much do building design bonds cost?

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Small businesses and contractors pay a median of $8 per month for surety bonds.

Insurance costs for building design businesses and contractors are based on a few factors:

  • Building design services offered
  • Business equipment and property
  • Business income and location
  • Number of employees

Other important policies for building designers

While license and permit bonds may be a necessary part of doing business, they don't protect your business against common risks. Building design professionals should also consider:

General liability insurance: This policy covers customer injuries and customer property damage, along with lawsuits over slander, libel, and copyright infringement.

Business owner’s policy (BOP): This package includes general liability insurance and commercial property insurance at a lower rate than purchasing each policy separately.

Professional liability insurance: Also called errors and omissions insurance (E&O), this policy covers legal costs related to your work performance.

Workers’ compensation insurance: Most states require workers' comp for businesses with employees. It covers medical costs if an employee is injured on the job.

Cyber liability insurance: This policy helps architects, engineers, and other building designers recover financially from data breaches and cyberattacks.

Commercial auto insurance: This policy helps cover costs if your business vehicle is involved in an accident. Each state has its own requirements for auto liability insurance.

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Are you ready to protect your building design business with small business insurance? Complete Insureon’s easy online application today to compare quotes from top U.S. carriers. Once you find the right policy, you can begin coverage in less than 24 hours.

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Updated: April 29, 2022
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