It’s the busy season for HVAC construction contractors throughout the nation. Nonetheless, it’s never a bad time to talk about your HVAC contractor license bond, even if you recently renewed your license. You may not realize it, but a proper understanding of contractor license bonds can save you a great deal of trouble and money. License bond know-how can even help your HVAC market efforts.

How so? Read on for five essential things you need to know about HVAC construction contractor license bonds.

Quick definition of contractor license bonds.The first thing to know about contractor license bonds is -- as their name suggests -- that the bond is a pre-licensing requirement before you can get your state license.

Contractor license bonds works somewhat like insurance, but the insurance is not for you – rather it protects the state, the public and your clients. After all, being a HVAC sales contractor involves some pretty complex work, and state regulators want to make sure your clients can be compensated in case something goes wrong.

Not every state requires a contractor license bond. That being said, not every state will require you to get a license, meaning you will not need a contractor license bond either.

Still, if you plan to work in another state besides your home state, make sure to fully understand their bonding requirements first. Each state requires a contractor license bond under different conditions, and for different amounts. To stay on the safe side, check out this comprehensive state-by-state list of licensing and bonding requirements, such as fees and exams, along with each state’s regulatory body.

A final remark: Certain states have no licensing requirements whatsoever and no statewide licensing boards, but you may still need to check with your local authority as some cities and counties have requirements of their own.

Understand how renewal works. Surety bonds, including contractor license bonds, resemble insurance in one more way – you pay for them in annual premiums, which are a small percentage of the total amount the state requires. The total amount indicates the sum up to which a client or the state can be compensated, in case of a claim.

This means you don’t just buy a contractor license bond once and forget about it – you have to renew it each time you renew your license. Usually that means once a year, but again, make sure you check your state’s particular requirements.

Saving money on your contractor license bond. Even though total amounts for your contractor license bonds are fixed, your premiums aren’t, and there’s a lot you can do to diminish your costs.

Many HVAC market contractors think that their premium only depends on their personal credit score. They are right -- if that’s the only information they provided their surety agent with. In fact, the price can be determined by other factors as well, so if your credit score is not perfect, you may provide additional information such as strong financial statements (both personal and those of your business) or a rich resume, showing you’re an experienced HVAC sales contractor.

The reason behind this is simple. For one thing, a bonding company will evaluate how likely you are to repay them in case of a claim against you. Most importantly, they want to see that your business is stable, and that you’ll use good business practices to avoid claims in the first place. Your personal credit score is crucial in determining your bond cost, but showing you have a lucrative, respected business will make you seem like a lower-risk applicant as well. If possible, also pay outstanding tax liens or civil judgments you may have – even though you will spend money for that, the savings on your bond may essentially outweigh them.

Contractor license bonds as a marketing tool. Something not many HVAC market contractors may realize is that a contractor’s bond and license can be a strong addition to their marketing toolbox.

The Internet makes it easy for you to reach out to your potential clients by showcasing your products and services. So why not also showcase the fact that you’re a licensed and bonded HVAC contractor? Potential clients might not be familiar with contractor license bonds, which gives you the opportunity to highlight the importance of being bonded, and the added security the bond gives them.

For more savvy clients, who already know what a license bond is and are actively looking for it, the Internet also makes it easy for them to check your licensing status with just a few clicks. With the help of this newly found knowledge you can get closer to being a successful HVAC construction contractor. Of course, the subject of contractor licensing is a comprehensive one, so if you still have questions, go ahead and leave us a comment in the section just below.