Who this applies to
In Tennessee, the licensing test is financial rather than bonded. A contractor's license, and the monetary limit that comes with it, rests on a financial statement prepared by a CPA, and the Board for Licensing Contractors does not require a bond of every licensee. Bonds come in at the edges of that system.
Home Improvement licensees. Holders of this license, whose work is residential remodeling of $3,000 to $24,999 [3] in nine counties [3] (Bradley, Davidson, Hamilton, Haywood, Knox, Marion, Robertson, Rutherford and Shelby), post a flat $10,000 [2] bond. A cash or property bond, or an irrevocable letter of credit, may be substituted as the proof of financial responsibility.
Licensees whose financials fall short. The Contractor's License Bond is optional. It is meant for a licensee whose CPA statement does not support the monetary limit it asks for and who cannot supply a Line of Credit or a Guaranty Agreement. The amount follows the limit: $500,000 [1] for a limit under $1,500,000 [1], or $1,000,000 [1] for a limit exceeding $1,500,000 [1].
What the rule says
The home improvement bond runs to the State of Tennessee for the benefit of all owners, as Title 62, Chapter 6 [2] defines owners, and it rests on T.C.A. § 62-6-506 [2]. The board's form also names Public Chapter 460 [2] as authority. However many years the bond stays in force, the surety's aggregate liability stops at $10,000 [2].
The Contractor's License Bond is a different instrument: an indemnity filed with the board [1]. The board's guidance confines it to extenuating circumstances and to use in lieu of the Guaranty Agreement, and filing it does not waive any other license requirement. Its obligee is the State of Tennessee, Department of Commerce and Insurance, Board for Licensing Contractors, and it cannot be released from liability for one year [1] after the license expires.
How to comply
The Tennessee Board for Licensing Contractors, within the Department of Commerce and Insurance, issues the forms for both bonds; its main page is tn.gov/commerce/regboards/contractors.
- Home Improvement license: the board publishes a Tennessee Home Improvement Contractor's Surety Bond form for the $10,000 [2] bond. A cash or property bond or an irrevocable letter of credit is the alternative.
- Contractor's License Bond: the board requires its exact form with a Power of Attorney attached [1], and the bond takes the place of the Guaranty Agreement only.
- Scope: whether the home improvement bond reaches your work depends on the county list and the $3,000 to $24,999 [3] range, so confirm both with the board.
Related
- Contractor license bond cost calculator: put in the home improvement amount or either indemnity amount, choose a credit tier, and read off a yearly premium range.
- All states' bond requirements: where Tennessee's financial-statement approach sits among the other states.