What a Washington contractor's bond and insurance actually protect
The $30,000 and $15,000 bonds, who can claim against them, the minimum liability insurance, the disclosure statement you must be given and how liens and retainage fit in.
Each listing on this site shows a bond amount and, for most contractors, an insurance amount. Those numbers look reassuring. This guide explains what they legally are, so you know what they do and what they do not.
The bond
Under RCW 18.27.040, general contractors must file a surety bond of $30,000 and specialty contractors a bond of $15,000, with the State of Washington named as the obligee. Some older filings in the state's data still show lower amounts, and a bond posted years ago may differ from today's minimum; the amount on a profile is what L&I shows on file.
The bond is not insurance for the contractor and it is not a guarantee that your project will be finished. It is a pool of money that can be claimed against by several groups, including laborers and employees, material suppliers, subcontractors, the state for taxes, and customers who suffer a breach of a construction contract. One bond protects all of a contractor's customers, so an earlier claimant can use up the amount before you. The disclosure statement the law requires actually says the bond might not be sufficient to cover a claim.
Deadlines for claims
A residential homeowner who wants to make a claim against the bond must start a lawsuit (naming the bond and serving L&I) within two years of substantial completion or abandonment of the work. Other claimants have one year. The statute lists procedural steps and a filing fee. Consider legal advice before relying on these deadlines. Chapter 18.27 RCW also includes a residential homeowner recovery program in RCW 18.27.410 to 18.27.430, and L&I directs homeowners to read about eligibility before hiring.
Liability insurance
RCW 18.27.050 sets minimum insurance or an assigned account: $50,000 for property damage, $100,000 for injury or damage including death to any one person and $200,000 for more than one person. In practice most of the contractors in the state's file show much higher policies, often $1 million. Insurance protects against damage a contractor's work causes to your property and injuries to others. It does not pay to finish a project the contractor abandoned. If the policy lapses, the registration is suspended until coverage is refiled.
Workers' compensation
Separate from liability insurance, contractors with employees must carry state industrial insurance. If an uninsured worker is hurt on your property, you can face a problem. Ask for the contractor's L&I account number or proof of coverage.
The written disclosure statement
RCW 18.27.114 requires a contractor to give you a disclosure statement before starting work on residential projects of four or fewer units with a contract of $1,000 or more. It must tell you:
- whether the contractor is registered and the bond or deposit amount;
- that the bond might not be sufficient and that it covers all the contractor's customers;
- that you may withhold a contractual percentage (retainage) as protection;
- that if a supplier, employee or subcontractor is not paid, your property may be liened, and how to ask for lien release documents.
The contractor must keep the signed copy for at least three years, and cannot enforce a lien without proving it was given. Treat the statement as a checklist: ask for the lien releases.
Practical steps
- Pay in stages tied to finished work, not on the calendar.
- Use retainage where the contract allows it.
- Collect lien releases from suppliers and subcontractors before final payment.
- For a large job, ask about a performance bond. L&I suggests considering one for bigger projects.
- Keep the contract, change orders and messages.
This is general information, not legal advice. Check the current text of chapter 18.27 RCW at app.leg.wa.gov.