What a contractor's bond actually protects (and it isn't the contractor)

Maria was finally doing it. A new kitchen and bathroom. $150,000.

Her contractor was licensed. He had a bond. So when he asked for $60,000 up front, she felt safe.

A few weeks later, he stopped showing up. He stopped answering her calls.

"But he was bonded"

Maria filed a claim on his bond. That's when she learned two things.

• The bond was only $25,000.
• Three other homeowners had already filed claims.

Four families. One $25,000 bond. Even if Maria's claim is approved, she may get back only a few thousand dollars of the $60,000 she paid.

What a bond really is

Most people think a bond is insurance for the contractor. It's the opposite. It's there to protect you. It's just much smaller than most people think.

• In California, every licensed contractor must carry a $25,000 license bond.
• That went up from $15,000 under Senate Bill 607, on January 1, 2023.
• If the business is an LLC, it also needs a separate $100,000 bond for its employees and workers.

What a bond covers

If a licensed contractor breaks the state's license rules, people who were harmed can file a claim. For example:

• Walking away from a job
• Not paying a subcontractor
• Never pulling a required permit

A bond is not general liability insurance. It does not promise the work will be done well.

Why $25,000 doesn't go far

• It's the total for every claim against that contractor, not just yours.
• If several people file, the money gets split or runs out.
• On a $150,000 remodel, it won't come close to covering a total loss.

A bond is a basic protection, not a safety net. Check that your contractor has one. Just don't count on it to make you whole.

What really protects your money

Don't pay for the whole job up front. Pay in stages, after each part of the work is done and approved. That way, a contractor never holds a big pile of money they haven't earned yet.

Think about Maria again. If she'd paid in stages, her first payment might have been $15,000 for demolition and framing she could see with her own eyes. When the contractor disappeared, she'd have had far less at risk.

How PayBild handles it

• Payments are set up in stages tied to milestones.
• Your money is held and released only as each stage is done and approved.
• Never all at once.

Before you hire anyone, you can check a contractor's license and bond for free on the CSLB website.

See how milestone payments work

Tara

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Sources: California Senate Bill 607, effective January 1, 2023. CSLB bonding requirements. Maria is a made-up example, based on real situations. Rules differ from state to state, so if you live outside California, check your own state's requirements. General information, not legal or financial advice.