Short Answer: A contractor bond pays valid claims when a contractor breaks the contract or fails to pay workers, suppliers or taxes. Liability insurance pays for accidental property damage and injuries. Washington requires registered contractors to carry both.
Quick Facts
| General contractor bond | $30,000 (RCW 18.27.040) |
|---|---|
| Specialty contractor bond | $15,000 (RCW 18.27.040) |
| Liability minimums | $50,000 property; $100,000 one person; $200,000 more than one person (RCW 18.27.050) |
| Combined single limit L&I accepts | $250,000 |
| How a bond claim is made | Lawsuit in superior court, served through L&I |
Key Takeaways
- A bond protects customers and others when a contractor breaks the law or the contract; insurance covers accidental damage and injury.
- Washington requires both: a $30,000 (general) or $15,000 (specialty) bond and liability insurance.
- Bond claims are made through a superior court lawsuit; insurance claims go to the insurer.
- Neither guarantees full recovery, so verify both and keep payments tied to completed work.
“Licensed, bonded and insured” is printed on countless trucks. In Washington, a registered contractor must be both bonded and insured, but the two protect against very different problems. Knowing which is which tells you where to turn if something goes wrong.
The Short Answer
| Surety bond | Liability insurance | |
|---|---|---|
| Purpose | Guarantees the contractor follows the law and its contracts | Protects against claims for accidental damage or injury |
| Who it protects | Customers, workers, suppliers, the state | The contractor (and indirectly the injured party) |
| Typical trigger | Breach of contract, unpaid workers or suppliers | Accidental property damage, bodily injury |
| Washington minimum | $30,000 general, $15,000 specialty | $50,000 property damage; $100,000 one person; $200,000 more than one person |
| How you claim | Lawsuit in superior court, served through L&I | Claim to the insurance company |
| Who ultimately pays | Surety pays, then seeks repayment from the contractor | Insurer pays within policy terms |
What a Contractor Bond Covers
Under RCW 18.27.040, the bond is conditioned on the contractor paying people entitled to payment and performing contracts in compliance with the law. In practice, bond claims include:
- breach of contract, such as abandoning a job or seriously defective work,
- unpaid wages and benefits owed to the contractor’s employees,
- unpaid subcontractors and material suppliers,
- certain taxes owed to the state.
The bond is a shared pool. When claims exceed it, the law sets a payment order, and employees are paid first. A $30,000 bond facing several claims can run out. The process is in How to File a Claim Against a Contractor Bond in Washington, and amounts are in Washington Contractor Bond Requirements.
What Liability Insurance Covers
RCW 18.27.050 requires public liability and property damage insurance. It is designed for accidents:
- a crew member starts a fire,
- a dropped load damages your car,
- a pipe connection fails and floods the floor below,
- a passer-by is injured by falling debris.
Liability policies typically exclude the cost of redoing the contractor’s own faulty work. Policy wording matters, so the insurer decides coverage case by case. More detail is in Washington Contractor Insurance Requirements.
Which One Applies to My Problem?
The Contractor Took a Deposit and Disappeared
A breach of contract: a bond issue. Pursue the contractor and consider a bond claim.
The Work Is Poor and the Contractor Will Not Fix It
Usually a breach of contract: a bond issue, plus direct claims against the contractor.
The Contractor’s Work Caused Water Damage to My Home
Accidental damage: often an insurance issue. Notify the contractor and its insurer quickly, and your own homeowner’s insurer too.
A Worker Was Injured on My Property
This involves workers’ compensation, which is separate again. Employers in Washington generally need an L&I workers’ comp account.
A Supplier Filed a Lien on My House
The supplier may claim against the contractor’s bond, and lien law gives you defences. Lien releases help prevent this.
Tip: When in doubt, notify both the surety and the insurer in writing. They will tell you whether your claim falls under their coverage.
Why Both Are Required
The bond protects the integrity of the deal; insurance protects against accidents. Together they give homeowners, workers and suppliers a minimum level of protection. In Washington, losing either one has consequences: a cancelled bond or lapsed insurance suspends the registration.
Workers’ Compensation: The Third Protection
Washington employers generally must have an L&I workers’ compensation account. L&I Verify shows the account status. If a contractor with employees has no active account, injured workers may have a harder path to benefits.
Limits You Should Know
- Bond amounts are modest relative to many projects.
- Insurance has exclusions, especially for faulty workmanship.
- Neither covers unregistered contractors.
- Timing matters: coverage depends on the dates in effect.
That is why verification, a good contract, milestone payments and retainage remain your best protections.
How to Verify Both
- Search the contractor on L&I Verify.
- Note the bond company, bond amount and effective dates.
- Note the insurance company and policy period.
- Ask for a certificate of insurance and confirm it with the insurer, as described in How to Verify a Contractor’s Insurance.
A Worked Example: One Project, Two Problems
A homeowner hires a registered specialty contractor to replace a bathroom. Two things go wrong.
First, while soldering a pipe, a worker scorches a wall cavity and starts a small fire that damages the hallway. That is an accident. The homeowner notifies the contractor and its liability insurer, and also their own home insurer. The insurers work out which policy responds and how.
Second, the contractor then stops turning up, leaving the shower half-tiled after taking most of the price. That is a broken promise: a breach of contract. The homeowner writes to the contractor, documents the unfinished work, gets estimates to finish it and, when nothing changes, files a bond claim within the deadline.
Same contractor, same project, two different protections. Treating them as one thing would have sent at least one claim to the wrong place.
Key Terms
- Surety: the company that issues the bond and pays valid claims, then seeks repayment from the contractor.
- Principal: the contractor whose obligations the bond guarantees.
- Obligee: the party the bond protects; for Washington registration bonds, the state on behalf of claimants.
- Certificate of insurance: a summary of a policy’s coverage at a point in time.
- Combined single limit: one limit covering both bodily injury and property damage per occurrence.
Bonds Outside Construction Registration
You may see other bonds mentioned on large projects, such as performance or payment bonds that a project owner requires for a specific job. These are separate from the registration bond and are more common on commercial and public work. For most homeowners, the registration bond and liability insurance are the two protections that matter.
Bottom Line
Bond for broken promises, insurance for accidents. A Washington contractor needs both, and you should check both are current before signing and before large payments.
Steps to Take
- Decide whether your problem is a broken contract (bond) or accidental damage or injury (insurance).
- Look up the contractor on L&I Verify and note the bond and insurance on file.
- For insurance, contact the insurer named on the record and report the claim.
- For a bond claim, follow the superior court process and deadlines.
- Keep photos, invoices and letters for either route.
Frequently Asked Questions
Is a Contractor Bond the Same as Insurance?
No. A surety bond is a guarantee that the contractor will follow the law and its contracts; the surety can recover what it pays from the contractor. Liability insurance protects the contractor against claims for accidental property damage or injury.
Which One Covers Bad Workmanship?
Poor or unfinished work is typically a breach of contract, which is a bond issue. Liability insurance generally covers accidental damage, such as a fire or flood caused by the work, rather than the cost of redoing faulty work.
Can I See a Contractor's Bond and Insurance?
Yes. L&I Verify shows the bond company, amount and dates and the insurance company and policy dates. You can also ask for a certificate of insurance.
Sources
- RCW 18.27.040 – Bond or Other Security Required
- RCW 18.27.050 – Insurance or Financial Responsibility Required
- Washington L&I – Verify a Contractor, Tradesperson or Business
- Washington L&I Contractor Bond Data (data.wa.gov)
- Washington L&I Contractor Insurance Data (data.wa.gov)
Data references use Washington L&I open data published under the PDDL. This guide is general information, not legal advice.