Quick Facts:

  • Regulating Agency: Tennessee Board for Licensing Contractors
  • Required Bond Amount: Varies – $10,000 for Home Improvement contractors; up to $1,000,000 for certain General Contractors
  • Cost Range: $100-$10,000 annually (depending on credit and bond amount)
  • Required For: Home Improvement contractors in specific counties, General Contractors with financial deficiencies, Fire Protection Sprinkler contractors, and various local license requirements

What Is a Tennessee Contractor License Bond?

A contractor license bond is a type of surety bond that serves as a financial guarantee that the contractor will comply with state and local laws, building codes, and the terms of their contracts. Unlike insurance, which protects the contractor, these bonds protect the public by providing financial recourse if a contractor breaches regulations or a contract. If a contractor abandons a job, performs substandard work, or violates building codes, the affected customer can make a claim against the bond for compensation.

Who Regulates Tennessee Construction Contractor Licensing?

The Tennessee Department of Commerce & Insurance, through the Board for Licensing Contractors, is the primary regulatory body for contractor licensing at the state level. The Board oversees licensing requirements, enforces regulations, and ensures contractors meet financial responsibility requirements.

Visit the Tennessee Board for Licensing Contractors website

What Bond Amount Is Required in Tennessee?

Tennessee does not mandate a blanket statewide contractor license bond for all contractors. Instead, bond requirements vary based on the type of license and circumstances:

  • Home Improvement Contractor Bond: $10,000 (required in specific counties for residential remodeling projects between $3,000 and $24,999)
  • General Contractor’s License Bond: $500,000 (for license limits up to $1,500,000) or $1,000,000 (for higher license limits) – only required when a contractor cannot meet financial requirements or is licensing a subsidiary
  • Fire Protection Sprinkler Contractor Bond: $10,000 (for contractors without a Board-issued license)

Additionally, local jurisdictions have their own bond requirements:

  • Nashville/Davidson County: $10,000 for projects under $25,000; $40,000 for projects $25,000+
  • Memphis/Shelby County: $25,000 for any contractor working in the county
  • Other cities/counties: Typically $5,000-$50,000 depending on location and trade

How Much Does a Contractor Bond Cost in Tennessee?

The premium (annual cost) for a contractor license bond is only a percentage of the full bond amount:

  • Typical rate range: 1-5% of the bond amount for applicants with good credit
  • Small bonds (e.g., $10,000): Often have a minimum premium around $100
  • Large bonds ($500,000+): May cost $5,000-$10,000 annually with good credit

Factors affecting bond cost:

  • Credit score and financial history: Better credit = lower rates
  • Industry experience: Established contractors typically qualify for better rates
  • Claims history: Previous bond claims will increase premiums
  • Bond amount: Larger bonds have higher absolute costs

Who Needs a Contractor License Bond in Tennessee?

Unlike some states, Tennessee does not require all contractors to obtain a license bond. Specific circumstances where bonds are required include:

  • Home Improvement Contractors: Required in nine counties (Bradley, Davidson, Haywood, Hamilton, Knox, Marion, Robertson, Rutherford, and Shelby) for residential remodeling projects between $3,000 and $24,999
  • General Contractors: Only if unable to meet financial requirements for their desired monetary limit, or when licensing a subsidiary
  • Fire Protection Sprinkler Contractors: Required if not already holding a contractor license with the appropriate classification
  • Local Trade Contractors: Many cities and counties require bonds for electrical, plumbing, HVAC, and other specialty trades
  • Any contractor pulling permits: Some jurisdictions (like Nashville/Davidson County) require bonds for all permit applications

What Other Contractor Bonds Are Required in Tennessee?

Beyond standard license bonds, Tennessee contractors may need:

  • Performance Bonds: Often required for public projects to guarantee completion
  • Payment Bonds: Ensures subcontractors and suppliers are paid (common on government projects)
  • Utility Bonds: May be required by utilities for service connections
  • Tax Bonds: Some cities require bonds to guarantee payment of local taxes

Additionally, most contractors need general liability insurance and workers’ compensation insurance, which are separate from bonding requirements.

How Does ContractorNerd’s Application Process Work?

  1. Complete a simple online application: Provide basic information about your business and the bond you need
  2. Receive your quote: For most standard bonds, rates are provided instantly
  3. Purchase your bond: Pay securely online with credit card or ACH
  4. Receive your bond documents: Digital copies are delivered immediately, with physical documents mailed if needed

The entire process can be completed online in minutes for most standard bonds. For larger bonds ($500k+), additional financial information may be required.

How Quickly Can I Purchase a Bond?

Most contractor bonds in Tennessee can be purchased instantly online. Small to medium-sized bonds ($10,000-$50,000) are typically approved with just basic information and a credit check. Even for larger bonds, the process is streamlined with same-day quotes available for qualified contractors.

Who Files the Bond With the TN Once It Is Purchased?

After purchasing your bond, you (the contractor) are responsible for filing it with the appropriate authority:

  • State-level bonds: Submit to the Tennessee Board for Licensing Contractors or relevant state department
  • Local bonds: File with the city/county’s codes or licensing office

Our partner surety companies provide all necessary documentation, including the original bond with a raised seal when required. For electronic filing options, we can provide properly formatted PDF documents that meet all state requirements.

How Are Claims Handled on a Tennessee Contractor Bond?

If a contractor violates license laws or breaches a contract, affected parties can make a claim against the bond:

  1. The damaged party files a claim with the surety company
  2. The surety investigates the claim’s validity
  3. If valid, the surety pays the claimant up to the bond’s limit
  4. The contractor must reimburse the surety for any amount paid out

Important to note: Unlike insurance, the contractor is ultimately responsible for repaying any claim amounts. The bond protects the public, not the contractor.

Frequently Asked Questions (FAQ)

Can I get a contractor bond with bad credit?

Yes, though rates will be higher. Even with credit challenges, most contractors can secure the necessary bonds through specialty markets that focus on higher-risk applicants. Premiums may range from 5-15% of the bond amount rather than the standard 1-5%.

What happens if I don’t have a required bond?

Operating without a required bond can result in:

  • License suspension or revocation
  • Inability to pull permits
  • Fines and penalties
  • Legal liability for operating without proper credentials

How do bond renewals work?

Most contractor bonds in Tennessee are issued for one-year terms. Renewal notices are typically sent 30-60 days before expiration. For continuous bonds, only a renewal payment is needed; for non-continuous bonds, updated paperwork may be required.

What’s the difference between a bond and insurance?

  • Bonds protect the public from contractor misconduct or violations. The contractor must repay any claims.
  • Insurance protects the contractor from various risks. The insurance company covers claims without reimbursement (beyond the deductible).

Both are essential parts of a contractor’s risk management strategy.

Ready to Get Your Tennessee Contractor License Bond?

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