Iowa Contractor License Bond

At the state level, Iowa regulates construction contractors through registration. Under Iowa Code chapter 91C, anyone earning $2,000 or more a year from construction must register with the Iowa Department of Inspections, Appeals, and Licensing (DIAL), and separate state licenses apply to certain trades, such as plumbing, mechanical and electrical work. The state's contractor license bond is the $25,000 out-of-state contractor bond that chapter 91C requires contractors based outside Iowa to file when they register, unless they're prequalified with the Iowa DOT. It guarantees that taxes, unemployment insurance contributions, penalties and fees owed to Iowa get paid, and only the State of Iowa and its agencies can collect on it.

Key Takeaways

• Who needs it: contractors whose principal place of business is outside Iowa, unless they're prequalified with the Iowa DOT. An Iowa branch office doesn't change that.
•  Bond amount: $25,000, filed on DIAL's Out-of-State Contractor Bond form.
•  Cost: with a credit score of 700 or higher, expect to pay roughly $250 to $750 a year.
• Trade license bonds: plumbing and mechanical contractors licensed by the PMSB need a separate $5,000 bond, plus $500,000 in public liability insurance.

Want to understand what moves your premium? Read our surety bond cost guide, run the numbers with our surety bond cost calculator, or check out these tips for lowering your surety bond rate.

1. Get Your Iowa Unemployment Insurance Number

DIAL won't process a registration without an Iowa unemployment insurance (UI) account number, and that applies to out-of-state contractors with no employees too. You can set one up through Iowa Workforce Development's myIowaUI system. If you have employees, also line up a workers' compensation certificate of insurance that lists DIAL as the certificate holder.

2. Apply Online

Fill out our online application; it only takes a few minutes. Have this information on hand:

• your business's legal name and principal business address,
• your entity type, such as corporation, LLC or sole proprietorship, and
• your Iowa contractor registration number, if you're replacing an existing bond.

3. Receive Your Quote

Applicants with good credit usually see a quote within minutes. If your file needs a closer look, for example because of past credit issues, underwriting can take a day or two. Either way, we shop your application to find you the most competitive rate available.

4. Submit the Bond With Your DIAL Registration

After you pay, we issue the bond on DIAL's official Out-of-State Contractor Bond form, signed and sealed by the surety. Submit it with your registration through DIAL's online portal or by mail, along with your UI number, NAICS code and the $50 registration fee. DIAL issues a registration number, which starts with C followed by six digits, within 30 days of receiving a complete application.

First time getting bonded? Our how to get bonded guide covers the basics. If you get stuck, reach out to our team or call (877) 514-5146.

Who Counts as an Out-of-State Contractor?

DIAL's rules define an out-of-state contractor as one whose principal place of business is in another state. That's the state where a substantial part of your business is conducted and from which central supervision is exercised. DIAL weighs factors such as:

• The home office listed on your government filings,
• Where payroll is prepared, where business transactions take place and where management decisions are made, and
• Where your owners or officers live and work, where your bank accounts are held and where your fixed business property is located.

Opening a branch office in Iowa won't make you an in-state contractor if your business is primarily based elsewhere.

The Iowa DOT Prequalification Alternative

Contractors prequalified to bid on Iowa Department of Transportation projects don't have to file the bond. Instead, they submit a copy of the DOT letter confirming their prequalification under Iowa Code §314.1.

Plumbing and Mechanical Contractors

Contractors who provide plumbing, mechanical, HVAC-refrigeration, sheet metal or hydronic services on a contract basis also need a contractor license from the Plumbing and Mechanical Systems Board (PMSB). Under 481 IAC 431.3, license holders must maintain:

• a surety bond of at least $5,000,
• at least $500,000 in public liability insurance, and
• a master of record with an active master license in each discipline they perform.

Both the bond and the insurance must require 10 days' written notice to the board before cancellation. According to DIAL, the PMSB bond is a performance bond that protects your customers against breach of contract, and the State of Iowa and the board can’t be its beneficiaries. That makes it different from the registration bond. PMSB uses a joint application, so you receive your license and your DIAL registration number together. Out-of-state applicants still need the $25,000 registration bond as well. 

Electrical Contractors

Electrical contractors are licensed by the Electrical Examining Board and must be, or employ, a licensed master electrician and be registered under chapter 91C. The board's current rules don't set a license bond, although Iowa Code §103.6 allows the board to require one. Instead, its financial responsibility rule requires at least $1 million in general and completed operations liability insurance. See DIAL's electrical licensing page for details.

Other Bonds Iowa Contractors May Need

Your registration bond doesn't guarantee any particular job. Public projects and many private ones call for contract bonds, such as bid bonds, performance bonds and payment bonds. Some Iowa cities also set their own contractor bond requirements. Bettendorf, for example, requires general contractors to keep a bond on file with the city, $10,000 for residential work and $250,000 for commercial, industrial and multi-family work, so check with the local building department before work begins. Out-of-state contractors should also review the Iowa Department of Revenue's contractors guide for sales and use tax rules. For other bonds required in the state, see our Iowa surety bonds page.

Any person or business earning $2,000 or more a year from construction work in Iowa must register with DIAL, whether or not a bond is required. Iowa defines construction broadly to include new work, additions, alterations, reconstruction, installations, repairs and demolition, so carpenters, roofers, painters, electricians, plumbers, excavators and general contractors all fall under the rule.

You don't need to register if:

• You earn less than $2,000 a year from construction, or
• You only work on your own property.

Subcontractors aren't covered by a general contractor's registration, every business with its own federal ID number needs a separate registration, and a joint venture is registered on its own. Working without registration, or an out-of-state contractor failing to file the required bond, can bring a citation of up to $500 for a first violation and up to $5,000 for each repeat violation. Unregistered contractors also can't be awarded state contracts.

Under Iowa Code §91C.7, the Iowa out-of-state contractor bond is continuous. It stays in force until your surety cancels it, and the surety must give you and DIAL at least 30 days’ written notice first. DIAL’s bond form, however, limits each bond to the one-year statutory period and runs it with the annual term of your registration. You don’t refile the bond when you renew your registration, since DIAL treats it as continuous until it receives a cancellation notice, but your surety still bills the premium each year, so expect to renew the bond with your surety annually to keep it active.

Once a cancellation takes effect, the surety isn't liable for contracts you start afterward. DIAL can also revoke your registration if you stop meeting its conditions, and for out-of-state contractors the bond is one of them.

When you finish working in Iowa, the bond stays in place until DIAL releases it. Before releasing it, DIAL notifies the Department of Revenue, Iowa Workforce Development's unemployment insurance division and any applicable state subdivisions, which have 10 days to object. The bond isn't released until all taxes and fees from your Iowa work are paid or the agencies approve the release.

You can check any contractor's registration status with DIAL's public contractor search.

How much is an Iowa contractor license bond?

Out-of-state contractors file a $25,000 bond to register with DIAL under Iowa Code chapter 91C. You pay a yearly premium based mostly on your credit, and applicants with scores of 700 or higher typically pay $250 to $750 a year. Licensed plumbing and mechanical contractors carry a separate $5,000 bond.

Do in-state contractors need a bond in Iowa?

Not for registration. Iowa-based contractors register with DIAL without filing a state bond. However, plumbing and mechanical contractors licensed by the PMSB need a $5,000 surety bond, and some cities set their own contractor bond requirements.

How long does an Iowa out-of-state contractor bond last?

Under Iowa Code §91C.7, the bond is continuous, so it stays in effect until the surety cancels it with at least 30 days’ written notice to you and DIAL. DIAL’s bond form, however, limits each bond to the one-year statutory period and runs it with the annual term of your registration, so you renew it and pay a premium each year to keep it active. Without an active bond or a DOT prequalification letter, an out-of-state contractor no longer meets Iowa's registration requirements.

Who can make a claim on an Iowa out-of-state contractor bond?

Only the State of Iowa and its agencies can collect on it, so it isn't a source of recovery for homeowners or subcontractors. It secures unpaid taxes, unemployment insurance contributions, penalties, interest and fees. Before the bond is forfeited, the contractor and surety receive notice and have 30 days to request a hearing with the director of revenue. The forfeiture equals the assessed taxes payable or the bond amount, whichever is less.

Do I need to register as a contractor for small jobs in Iowa?

It depends on your yearly total, not the size of a single job. If you earn $2,000 or more a year from construction in Iowa, you must register. People who earn less than that, or who only work on their own property, are exempt.

Do out-of-state subcontractors need their own Iowa contractor bond?

Yes. A general contractor's registration and bond don't extend to its subcontractors. Each out-of-state subcontractor must register with DIAL and file its own $25,000 bond, unless it qualifies for the Iowa DOT prequalification alternative.

Can I get an Iowa contractor bond with bad credit?

Yes. Lower credit means a higher rate, but our bad credit program helps contractors with challenged credit get bonded and licensed.

More questions? Visit our surety bond FAQ or contact our team.