New Jersey Contractor License Bonds

At Surety Bonds Agent, we offer a full range of surety bonds nationwide through an extended carrier network. Continue below to learn more about New Jersey contractor license bonds. If you have additional questions or want to explore bonding solutions for your business, speak with one of our knowledgeable surety bond experts.

 

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What Is a Contractor License Bond?

A New Jersey contractor license bond is a surety bond providing financial protection for the customers of a licensed contractor.

 

Who Needs One?

New Jersey does not require contractors to be licensed at the state level. However, some municipalities require contractors working in their jurisdiction to obtain a local license or permit and furnish the local licensing authority with a contractor license bond. Jersey City and Ventnor both fall into this category.

How Does a Contractor License Bond Work?

There are three parties to a New Jersey contractor license bond:

  • The municipality is the “obligee” requiring the bond.
  • The contractor is the “principal” purchasing the bond.
  • And the bond’s guarantor is known as the “surety.”

The terms of a New Jersey contractor license bond require the principal to operate in accordance with all applicable laws and regulations. A violation that causes the project owner to incur a financial loss gives that customer the right to file a claim against the bond. The claimant will be compensated up to the full amount of the bond if the surety finds the claim to be valid.

The contractor is legally obligated to pay all valid claims, but the surety guarantees their payment by agreeing to lend the principal the funds to pay them if necessary. The surety pays the claimant directly, and the principal must then repay the surety within a certain period of time. Failing to repay that debt exposes the principal to likely legal action by the surety.

How Much Does It Cost?

The annual premium rate for a New Jersey contractor license bond is a small percentage of the required bond amount. The surety sets the premium rate for a given principal through an underwriting assessment of the risk to the surety—specifically, the risk of not being repaid for claims paid on the principal’s behalf. The primary consideration in that risk assessment is the principal’s personal credit score.

With a high credit score, a principal is assumed to be a low risk to the surety, which means the premium rate also will be low.  Someone with a low credit score is assumed to be a greater risk to the surety, which results in a higher premium rate. A well qualified principal typically is assigned a premium rate in the 1% to 3% range.

At Surety Bonds Agent, we offer a full range of surety bonds nationwide through an extended carrier network. Continue below to learn more about New Jersey contractor license bonds. If you have additional questions or want to explore bonding solutions for your business, speak with one of our knowledgeable surety bond experts.

 

CONTACT US FOR A

FREE CONSTRUCTION BOND QUOTE

What Is a Contractor License Bond?

A New Jersey contractor license bond is a surety bond providing financial protection for the customers of a licensed contractor.

 

New Jersey does not require contractors to be licensed at the state level. However, some municipalities require contractors working in their jurisdiction to obtain a local license or permit and furnish the local licensing authority with a contractor license bond. Jersey City and Ventnor both fall into this category.

There are three parties to a New Jersey contractor license bond:

  • The municipality is the “obligee” requiring the bond.
  • The contractor is the “principal” purchasing the bond.
  • And the bond’s guarantor is known as the “surety.”

The terms of a New Jersey contractor license bond require the principal to operate in accordance with all applicable laws and regulations. A violation that causes the project owner to incur a financial loss gives that customer the right to file a claim against the bond. The claimant will be compensated up to the full amount of the bond if the surety finds the claim to be valid.

The contractor is legally obligated to pay all valid claims, but the surety guarantees their payment by agreeing to lend the principal the funds to pay them if necessary. The surety pays the claimant directly, and the principal must then repay the surety within a certain period of time. Failing to repay that debt exposes the principal to likely legal action by the surety.

The annual premium rate for a New Jersey contractor license bond is a small percentage of the required bond amount. The surety sets the premium rate for a given principal through an underwriting assessment of the risk to the surety—specifically, the risk of not being repaid for claims paid on the principal’s behalf. The primary consideration in that risk assessment is the principal’s personal credit score.

With a high credit score, a principal is assumed to be a low risk to the surety, which means the premium rate also will be low.  Someone with a low credit score is assumed to be a greater risk to the surety, which results in a higher premium rate. A well qualified principal typically is assigned a premium rate in the 1% to 3% range.

 

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