Bonding in Ohio

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 public owner (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. Ohio uses bonds in 3 distinct places, and contractors regularly confuse them. Keep them separate. 1. OCILB state license: no surety bond required. The Ohio Construction Industry Licensing Board, which licenses commercial electrical, plumbing, HVAC, hydronics, and refrigeration contractors under ORC Chapter 4740, does not require a state surety bond for license issuance. The statutory financial-responsibility requirement is a Certificate of Liability Insurance showing at least $500,000 in contractor liability coverage, held in the name of the licensed contracting company (see contractor-licensing.json for the full license checklist). 2. Municipal contractor registration bonds. Ohio's major cities run their own contractor registration systems and typically require a local surety bond on top of the state OCILB license and any trade-specific local permit. Examples at the time of review: - Columbus. The Department of Building and Zoning Services requires a $25,000 Contractor License/Registration Bond for general, specialty, and sewer/sidewalk contractor registrations. - Cleveland. The Department of Building and Housing requires a $25,000 surety bond for general contractor licensure under the Cleveland Codified Ordinances, renewed annually (bonds expire December 31). - Cincinnati. The Department of Buildings & Inspections requires a $10,000 contractor license bond as part of registration, along with a registration fee and insurance showings. Amounts, forms, and expiration dates change. Pull the current application packet from the city building department before you buy the bond, and confirm whether residential-only work in that city needs a different registration class. 3. Public improvement payment and performance bonds (Ohio's Little Miller Act). Ohio Revised Code 153.54 governs bonding on public improvement contracts awarded by the state, a county, township, municipal corporation, school district, or other political subdivision. The bidder first posts a bid guaranty in the form of a bond, certified check, cashier's check, or irrevocable letter of credit equal to 10% of the bid amount. When the successful bidder enters into the contract, the bidder must file a bond in the amount of the contract to indemnify the public owner against damages from failure to perform according to the contract. ORC 153.571 sets the statutory bond form; the bond obligates the principal to pay all lawful claims of subcontractors, material suppliers, and laborers for work and materials furnished on the contract. These public-works bonds are separate from any OCILB or city contractor bond and do not substitute for either. 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. A $25,000 Columbus or Cleveland registration bond at 2% is $500 per year. A $10,000 Cincinnati bond at 2% is $200 per year. Public-works payment and performance bonds are priced per job, usually 0.5% to 3% of the contract price. What claims look like. For a municipal registration bond, a claimant typically files a complaint with the city building department; the city can suspend the registration and pursue the bond for unpaid judgments or code violations within the bond's coverage. For an ORC 153.54 public-works bond, an unpaid subcontractor, supplier, or laborer on the project files a claim against the bond after following the statutory notice and timing rules. In both cases the surety pays valid claims and then pursues the contractor for reimbursement. Bond, insurance, and workers' compensation are separate requirements. An Ohio commercial trade contractor typically carries the $500,000 OCILB liability insurance, any municipal contractor bond where the work is performed, Ohio Bureau of Workers' Compensation coverage for employees, and public-works payment and performance bonds when bidding covered public contracts. Confirm each requirement against the current OCILB rules, city ordinance, and project bid documents before you assume you are compliant.