Tennessee Risk Management, Bonds & Insurance
Bonds and insurance each cover a specific party or peril. This chapter covers the payment bond and builder's risk insurance.
The payment bond
On a project with the three standard construction bonds, the payment bond protects subcontractors and suppliers if the general contractor fails to pay them. A bid bond protects the owner against a low bidder that backs out, and a performance bond protects the owner by assuring completion - each bond runs to a different party.
Builder's risk insurance
Builder's risk (course-of-construction) insurance covers the structure and materials while the project is being built, against perils such as fire, wind, and theft. It is distinct from workers' compensation, which covers employee injuries, and from auto liability, which covers vehicles - different risks entirely.
State-specific details
State exam facts
- State regulator
- Tennessee Board for Licensing Contractors (TBLC), Department of Commerce and Insurance
- Passing score
- 73%
- Scored questions
- 50
- Time limit
- 140 minutes
Does Tennessee require a state contractor license?
Yes. The Tennessee Board for Licensing Contractors (TBLC) licenses contractors under T.C.A. Title 62, Chapter 6. A license is required before bidding at $25,000 or more for general building work, $3,000 for masonry, and any dollar amount for electrical/plumbing/mechanical.
What is on the Tennessee Business and Law exam?
The Business and Law exam is 50 questions, 140 minutes, and requires 73% to pass. The monetary limit is the lesser of ten times net worth or ten times working capital; a reviewed or audited CPA financial statement is required for a limit above $1,500,000.
What are Tennessee's bid-law and lien rules?
Bidders must disclose license information under §62-6-119. Tennessee lien law (T.C.A. §66-11) gives the prime contractor a one-year enforcement period, and there is a 5% retainage-escrow rule (§66-34-104). Tennessee has no state income tax on wages.
Sources: https://www.tn.gov/commerce/regboards/contractor.html