Bonding in Kentucky

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. Kentucky is a state where trade licenses (electrical, HVAC, plumbing) are issued by DHBC divisions but where bonding is largely handled at the project or local-permit level rather than as a statewide license-bond requirement. Keep the following categories separate. 1. No statewide DHBC trade-license surety bond. Kentucky's DHBC electrical, HVAC, and plumbing licensing regulations do not impose a uniform statewide surety bond on every Master or Journeyman license. Licensees must maintain general liability insurance and (for contracting businesses) any insurance the DHBC requires, but a state-level license bond is not a universal requirement. Source: KY DHBC (https://dhbc.ky.gov/). 2. No statewide general contractor license; no state GC license bond. Kentucky does not issue a statewide general contractor license. General contracting is regulated at the city and county level; a local registration may require a local surety bond. Confirm the ordinance in each jurisdiction where you pull permits. 3. Public works payment and performance bonds (Little Miller Act, KRS 45A.190). Kentucky's Model Procurement Code (KRS Chapter 45A) governs state public works contracts. Performance and payment bonds are required on state public construction contracts exceeding $250,000 under published industry summaries of KRS 45A.190. Bonds each equal 100 percent of the contract amount. The performance bond runs to the governmental entity; the payment bond protects subcontractors and suppliers. Subcontractors on a bonded public job perfect claims against the payment bond rather than lien the public property. Verify the current threshold directly against KRS 45A.190 before assuming a job is bonded or unbonded. Source: KRS 45A (https://apps.legislature.ky.gov/law/statutes/chapter.aspx?id=37316). 4. Private construction mechanics' liens (KRS Chapter 376). On private Kentucky projects, subcontractors and suppliers use the mechanic's lien procedures in KRS Chapter 376. An owner or prime contractor may post a bond to discharge a filed lien under KRS 376.100. This is a project-specific tool, not a license bond. Source: KRS 376 (https://apps.legislature.ky.gov/law/statutes/chapter.aspx?id=38902). Premium math. A surety charges an annual premium, typically 1 to 3 percent 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 percent or more. Public works payment and performance bonds are priced per job, usually 0.5 to 3 percent of the contract price depending on contract size, job type, and the contractor's financial statements. Bond, insurance, and workers' compensation are separate requirements. A Kentucky contractor carries bonds only when a public contract or local ordinance triggers them, general liability insurance at limits the DHBC or project owner requires, and workers' compensation if you have any employees (KRS 342.630 treats most employers as subject to the Act).