The CSLB Doesn't Play Around
The Contractors State License Board regulates over 280,000 active licenses in California. Their enforcement division investigates complaints, conducts stings, and suspends licenses for insurance violations more often than most contractors realize.
Last year, the CSLB suspended or revoked over 4,000 licenses for insurance-related violations. That's roughly 11 suspensions per day. Most were for workers' compensation lapses, but bond violations and failure to maintain required coverage contributed significantly.
Understanding exactly what the CSLB requires keeps you working. Getting it wrong means your license goes inactive, your projects stop, and your clients scramble to find another contractor.
The Contractor License Bond
Every California licensed contractor must maintain a $25,000 contractor license bond. This requirement applies to all license classifications from Class A general engineering to every Class C specialty.
What the bond protects: The contractor license bond protects consumers who are damaged by a contractor's violation of the Contractors State License Act. Homeowners, commercial clients, and subcontractors can file claims against your bond for abandonment, departure from plans without authorization, substantial deviation from accepted trade standards, and financial harm caused by contractor misconduct.
What it costs: Most contractors pay between $100 and $500 annually for their license bond. The premium is based on the contractor's personal credit score. Strong credit scores (700+) result in premiums at the lower end. Poor credit pushes premiums higher and may require collateral.
The bond is not insurance. When a claim is paid on your bond, the surety company pays the claimant and then comes after you for full reimbursement. You are personally responsible for every dollar paid on your bond. This fundamental distinction catches contractors off guard.
Maintaining continuity: Your bond must remain active continuously for your license to remain valid. If the surety company cancels your bond, the CSLB receives notification and your license suspends automatically. There's a 90-day reinstatement window if the bond suspension results from the surety's cancellation rather than the contractor's request.
Workers' Compensation Insurance
The mandatory requirement: Any California contractor with one or more employees must carry workers' compensation insurance. There are no exceptions for part-time workers, seasonal help, or family members. One employee triggers the requirement.
Sole proprietor exemption: Contractors with no employees can file a Certificate of Exemption (form 11C-49) with the CSLB. This certifies that you have no employees and are not required to carry workers' comp. The exemption remains on file until you hire your first employee, at which point you must obtain coverage immediately.
What the CSLB checks: The CSLB receives electronic notifications from workers' comp carriers when a policy issues, renews, or cancels. If your carrier reports a cancellation and no replacement policy is reported, the CSLB suspends your license.
Penalties for operating without workers' comp: Operating without required workers' comp is a criminal offense in California. Beyond CSLB license suspension, violators face fines up to $100,000 or more. Stop-work orders can shut down every active project. Personal liability for all medical costs and lost wages of injured workers.
General Liability Insurance
Here's what surprises many contractors: the CSLB does not require general liability insurance. There's no state mandate for GL coverage tied to your license.
However, this doesn't mean you can operate without it. Project owners and general contractors universally require GL as a condition of working. Lenders require GL before financing construction projects. Your contracts will specify minimum GL coverage requirements.
The practical reality is that no working contractor in California operates without general liability, even though the CSLB doesn't mandate it. The marketplace enforces the requirement more effectively than any regulation.
The Qualifying Individual Bond
When a contractor's qualifying individual (the person whose experience and exam scores qualified the company for its license) leaves the company, a special bond situation arises.
The company has 90 days to find a replacement qualifier. During this period, the CSLB may require a qualifying individual bond to maintain the license. This bond typically runs $12,500 and provides additional consumer protection during the transition.
Disciplinary Bond Requirements
Contractors who receive CSLB disciplinary action may be required to post an additional disciplinary bond. These bonds range from $15,000 to $150,000 depending on the severity of the violation.
A disciplinary bond is separate from and in addition to the standard $25,000 license bond. It provides enhanced consumer protection while the contractor operates under disciplinary probation.
LLC Requirements
Contractors operating as limited liability companies face additional requirements. California requires an LLC employee/worker bond of $100,000 per member, up to a maximum of $500,000 for five or more members. This protects employees and workers from LLC liability limitations.
These bond amounts are substantial and carry premiums that significantly exceed standard license bond costs. Contractors considering LLC formation should factor bond costs into their entity structure decision.
Reporting Changes to the CSLB
Workers' comp changes: Your carrier reports directly to the CSLB. You don't need to file paperwork, but you should verify that your new carrier filed the notice correctly after any policy change or renewal.
Bond changes: Your surety company reports bond issuance and cancellation to the CSLB. Again, verify that reporting happened correctly after any change.
Business structure changes: If you change from sole proprietorship to corporation, add or remove partners, or form an LLC, you must notify the CSLB and update your insurance and bonding accordingly.
Keeping Your License Active
Set calendar reminders 60 days before every policy renewal. Confirm renewals processed correctly with both your agent and the CSLB online license check tool. Maintain a relationship with your insurance agent that ensures they prioritize your account at renewal.
Monitor your CSLB license status online quarterly. The CSLB's public license lookup tool shows your bond and workers' comp status in real time. If you see a status change you didn't expect, investigate immediately.
Common Questions
Does the CSLB verify my insurance coverage?
Yes. The CSLB receives electronic notifications from both surety companies and workers' comp carriers. They actively monitor coverage status for all licensed contractors.
What if I'm between carriers and there's a gap?
Even a one-day gap can trigger suspension. Coordinate policy transitions with your agent to ensure no gap in coverage dates. Bind replacement coverage before the existing policy cancels.
Can I reinstate a suspended license?
Yes, if the suspension is solely due to insurance/bond lapse. Obtain replacement coverage, ensure the carrier files the proper notice with the CSLB, and pay any reinstatement fees. The process typically takes two to four weeks.
Do out-of-state contractors need California bonds?
Any contractor licensed in California needs a California license bond, regardless of where their home office is located. Workers' comp must specifically list California as a covered state.