In many states, heating, ventilation, air conditioning, and refrigeration contractors or technicians must obtain a surety bond as part of the state licensing process.
The bonds are a three-party agreement which help protect consumers in the event an HVAC contractor performs a job that does not hold up to state regulations or if they are unable to fulfill the terms of a contracted job.
If your heating and cooling business is located in New Jersey, you probably know this policy as an HVACR surety bond.
The cost of an HVAC & Refrigeration bond will vary depending on two factors:
In general, licensing authorities—either at the local, county, or state level—will require varying bond amounts. These amounts can be as low as $3,000 in New Jersey to as much as $25,000 in Minnesota.
Contractors who must have this surety bond will pay an annual fee, which is known as the bond’s premium.
Premium rates may vary based on your credit. Prices can range from 1% to 15% of the total bond amount. NNA Surety Bonds offers HVAC & Refrigeration bonds in several states with premiums as low as $50.
* Cost can vary depending on the bond amount required and your credit rating
In many states, if you are an HVAC & Refrigeration contractor, you must be bonded to become licensed and to legally operate your business. You cannot become licensed without a surety bond in states that require them.
In addition, a surety bond encourages contractors to act ethically and to complete jobs in compliance with local and state rules and regulations. In other words, a surety bond adds credibility to you as a contractor by helping to protect consumers.
For example: If you are unable to fulfill the obligations of a contract with a customer, then that customer can file a claim against you. If their claim is upheld, the bond company (or surety) will pay the customer’s losses, and you will need to repay the surety afterward.
Most states require HVAC contractors to be licensed and to obtain a surety bond as part of their licensing process. But Minnesota stands out as an exception.
In Minnesota, performing gas, heating, ventilation, cooling, air conditioning, fuel burning, or refrigeration work falls under the umbrella of “Mechanical Contracting." While there is no state-level licensing requirement for these contractors, Minnesota does require them to file a $25,000 mechanical contractor bond in order to legally provide HVACR services.
MN Mechanical/HVACR contractors are also subject to local licensing requirements.