Bonding in Indiana

A surety bond is a 3-party promise. The contractor (the principal) pays a surety company for a bond that a customer, subcontractor, or a government entity (the obligee) can draw against if the contractor breaks the rules the bond covers. The surety pays valid claims up to the bond face value. The contractor then owes the surety for what the surety paid out. A bond protects the public. It is not insurance for the contractor. Indiana uses a mix of municipal license bonds for most trades, a state-level plumbing license (without a single statewide license bond), and statutory public-works bonds for government projects. Keep the categories separate. 1. No statewide general contractor license, and no statewide GC license bond. Indiana does not issue a statewide general contractor license, so there is no statewide GC license bond to post. General contractor and trade registrations at the city and county level typically require their own local bonds. 2. Plumbing. State license without a state bond, plus local bonds. The Indiana Plumbing Commission at PLA licenses Journeyman Plumbers and Plumbing Contractors statewide under Indiana Code Title 25, Article 28.5. The state license application does not require a statewide surety bond. City or county plumbing permits and registrations in jurisdictions like Indianapolis, Fort Wayne, and Evansville commonly require a local plumber's bond; amounts vary by ordinance. Source: Indiana Plumbing Licensing Information (https://www.in.gov/pla/professions/plumbing-home/plumbing-licensing-information/). 3. Electrical and HVAC. Municipal bonds only. Indiana does not license electricians or HVAC contractors at the state level. All trade bonding for those trades is set by the city or county ordinance where the contractor registers. Amounts and obligees vary. Confirm the local requirement in each jurisdiction where you pull permits. 4. Public works bonds under Indiana Code 5-16-5 and 5-16-5.5 (state and local public works), and Indiana Code 36-1-12 (local public works). Indiana Code 5-16-5.5 governs retainage, bonds, and payment on state public works. Under 5-16-5.5-4 the contractor must furnish a valid performance bond acceptable to the state agency in an amount equal to the total contract price; incremental bonding is permitted. Under 5-16-5-2 a public-works contract must provide for payment of subcontractors, labor, and suppliers through a payment bond in combination with statutory withholding procedures. For local public works under Indiana Code 36-1-12-13.1, a payment bond is required for any public work project with a cost in excess of $200,000. Sources: Indiana Code 5-16-5.5-4 (https://iga.in.gov/legislative/laws/2024/ic/titles/5#5-16-5.5); Indiana Code 36-1-12-13.1 (https://iga.in.gov/legislative/laws/2024/ic/titles/36#36-1-12). 5. Private projects and mechanic's liens. On private Indiana projects, subcontractors and suppliers use the mechanic's-lien procedures in Indiana Code Title 32, Article 28. An owner or original contractor may post a lien discharge bond under Chapter 28 to clear title. That is a project-based tool, not a license bond. Premium math. A surety charges an annual premium, typically 1% to 3% of the bond face value for a contractor with strong credit and no prior claims. Weaker credit, tax liens, prior surety losses, or a new business can push the rate to 5% to 10% or more. Public works performance and payment bonds are priced per job, usually 0.5% to 3% of the contract price depending on contract size, job type, and the contractor's financial statements. Bond, insurance, and workers' compensation are separate requirements. An Indiana trades firm should plan for (1) the state Plumbing Commission license (plumbers only), (2) each city or county contractor registration and its bond, (3) general liability and worker's compensation insurance, and (4) statutory public-works performance and payment bonds on any qualifying public contract.