Tennessee contractors have a new option for meeting certain financial requirements associated with their contractor licenses.
As of July 1, 2026, contractors can use a contractor’s surety bond instead of submitting a CPA-reviewed or CPA-audited financial statement to the Tennessee Board for Licensing Contractors.
Created through Public Chapter 1039 (2026) and reflected in Tenn. Code Ann. § 62-6-111, the new option gives contractors another way to establish or increase the monetary limit on their license without relying on the traditional CPA financial statement process.
Here’s what Tennessee contractors need to know about the new bond, how much coverage is required, and how it differs from other contractor bonds in the state.
What changed for Tennessee contractors in 2026?
Tennessee contractor licenses have monetary limits that determine the maximum dollar amount of an individual project or contract a contractor may undertake.
For initial licensing, financial statements have traditionally played a central role in establishing those limits. The Tennessee Board requires a CPA-reviewed financial statement for applicable limits of $3 million or less and an audited financial statement for limits exceeding $3 million.
As of July 1, 2026, contractors have another option.
Applicants and licensees may use the Board’s contractor’s surety bond as an alternative to submitting the applicable CPA-reviewed or CPA-audited financial statement.
The Tennessee Board for Licensing Contractors states that the bond must equal at least 50% of the requested monetary limit.
Learn more from the Tennessee Department of Commerce & Insurance.
How much does the Tennessee contractor’s surety bond need to be?
The required bond amount is based directly on the monetary limit requested by the contractor. The bond must be at least 50% of that requested limit.
For example:
| Requested Monetary Limit | Minimum Surety Bond |
|---|---|
| $100,000 | $50,000 |
| $250,000 | $125,000 |
| $500,000 | $250,000 |
| $1 million | $500,000 |
| $2 million | $1 million |
| $3 million | $1.5 million |
The bond amount is not the amount the contractor pays. Instead, the required amount represents the bond’s penal sum, or the maximum aggregate liability of the surety under the bond. The contractor pays a premium determined through the surety’s underwriting process.
Contractors seeking an unlimited monetary limit should confirm the applicable bond amount with the Tennessee Board or their surety when using the new bond option.
When can contractors use the new surety bond option?
The new bond option isn’t limited to contractors applying for their first Tennessee license. Under Tennessee’s 2026 legislation, the contractor’s surety bond can be used in place of an applicable financial statement in circumstances including:
- Initial contractor licensing
- Requests to increase a license’s monetary limit
- Applicable contractor license renewals
However, contractors should understand that the traditional financial requirements aren’t identical in each situation.
For example, Tennessee’s current renewal requirements are less stringent than its initial-license requirements. At renewal, a contractor with a monetary limit of $1.5 million or less may submit a self-prepared balance sheet. A renewal above $1.5 million requires at least a compiled financial statement prepared by a licensed CPA.
That distinction matters when deciding whether the new bond option makes sense for a particular contractor.
Contractors choosing the bond must use the Board-approved contractor’s surety bond form.
What does the contractor’s surety bond cover?
The Tennessee contractor’s surety bond isn’t simply a substitute piece of financial paperwork. It also provides financial protection for people harmed by certain actions of the contractor.
Under Tennessee law and the state’s required bond form, the bond is for the benefit of a person who is damaged by:
- An act or omission by the contractor that constitutes a breach of a construction contract, or
- An unlawful act or omission by the contractor in the performance of contracting.
A person who suffers qualifying damages may bring an action directly against the bond. However, the bond does not make the surety responsible for completing the contractor’s construction contracts. The surety’s aggregate liability also cannot exceed the amount of the bond.
Does the Tennessee contractor’s surety bond expire?
The state’s contractor’s surety bond is written as a continuous bond.
If a contractor chooses the bond instead of the applicable financial statement route, the bond must remain in effect while the contractor relies on it to satisfy the state’s financial requirement.
This is particularly important because if the required bond ceases to be effective without the contractor providing a financial statement that meets the Board’s requirements, the contractor’s license becomes invalid.
The Board’s official bond form allows the surety to cancel the bond by providing 30 days’ notice to both the Tennessee Board for Licensing Contractors and the contractor.
Contractors using this option should treat continuous bond coverage as essential to maintaining their license.
How long can someone make a claim against the bond?
The Board’s official Contractor’s Surety Bond Form provides another important detail. An action against the bond generally must be brought within one year after the expiration of the license period during which the applicable act or omission occurred.
The bond also does not cover breaches of construction contracts entered into after the contractor’s license has been inactivated, expired, or revoked.
Contractor’s Surety Bond vs. Tennessee Contractor’s License Bond
The new terminology can be confusing because Tennessee already uses other types of contractor bonds.
The Contractor’s Surety Bond introduced in 2026 is specifically designed as an alternative to applicable financial statements.
A separate Contractor’s License Bond has historically been available in certain circumstances as an indemnity or in place of a Guaranty Agreement. The Board currently identifies amounts of $500,000 or $1 million for an unlimited monetary limit for that separate bond mechanism.
Tennessee also requires a separate $10,000 Home Improvement Surety Bond for applicable home improvement contractors.
These are different bond requirements serving different purposes.
If you’re using the new financial-statement alternative, make sure you’re applying for the Board-approved contractor’s surety bond, rather than assuming another Tennessee contractor license bond will satisfy the requirement.
Surety Bond or Financial Statement: Which should you use?
The new law gives Tennessee contractors another option rather than eliminating the financial-statement process.
Depending on the licensing transaction, a contractor may be able to continue using the applicable financial documentation or choose the new contractor’s surety bond.
The right approach depends on the contractor’s circumstances.
- The traditional financial-statement route may remain appropriate for contractors that already prepare the required financial documentation as part of their normal accounting process.
- The surety bond option may be worth considering for contractors that would prefer to satisfy the applicable licensing requirement through bonding.
Keep in mind that surety bonds are underwritten. Availability and premium can depend on the required bond amount and the contractor’s financial and credit profile.
How to Get a Tennessee Contractor’s Surety Bond
If you decide to use the new bond option, the basic process is:
- Determine your requested monetary limit. The required bond must equal at least 50% of the applicable monetary limit.
- Apply for your surety bond. The surety will review the application and applicable underwriting information.
- Obtain the bond on the Board-approved form. Tennessee requires contractors choosing this option to use its Contractors’ Surety Bond form.
- Submit the bond with your licensing documentation. Follow the Tennessee Board for Licensing Contractors’ current procedures for your application, renewal, or monetary-limit request.
- Keep the required bond continuously in effect. If you’re relying on the bond to satisfy the state’s requirement, allowing it to cease without providing acceptable financial documentation can invalidate your contractor license.
Get a Tennessee Contractor’s Surety Bond with ZipBonds
Tennessee’s new contractor’s surety bond gives contractors another way to satisfy applicable state financial requirements. But getting the bond amount and form right matters.
ZipBonds specializes in surety bonds for contractors and can help you understand the bonding requirement, apply for the appropriate bond, and navigate the surety process.
Whether you’re applying for a Tennessee contractor license, requesting a higher monetary limit, or reviewing your options for an upcoming renewal, our team can help you determine whether the new Contractors’ Surety Bond fits your licensing needs.