License and permit bond

A license and permit bond is a surety bond that a state, county or city requires as a condition of granting a license or permit. It guarantees the business will comply with the licensing law and the rules of the trade. If it does not and someone is harmed, the injured party or the agency can claim against the bond up to its penalty amount.

Contractors, auto dealers, mortgage brokers, freight brokers, collection agencies and many other trades need one. The required amount is set by statute or rule and varies. California's contractor license bond is $25,000 as of January 1, 2023, the FMCSA freight broker bond is $75,000 under 49 CFR 387.307, and the Medicare DMEPOS supplier bond is $50,000 per National Provider Identifier under 42 CFR 424.57(d).

The most common misunderstanding is who is protected. The bond protects the public and the agency, not the business. If the surety pays a valid claim, it recovers the money from the principal under the indemnity agreement. Price is a small percentage of the bond amount, driven largely by credit and experience, and lapse can mean a suspended license. Keep the bond continuous and renew on time. The guide on license and permit bonds: who needs one and how they work lists common types, what a surety bond costs and how it is priced explains pricing, and the surety bond cost calculator gives an estimate.