New Mexico 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 Mexico 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 Mexico contractor license bond protects the state and consumers from financial harm caused by a licensed contractor. The surety bond agreement requires the contractor to operate in compliance with state laws and regulations governing the kind of contracting work they do. It also indemnifies the state against any liability for monetary damages incurred as a result of negligent or substandard work.

 

Who Needs One?

In New Mexico, contractors are licensed by the Construction Industries and Manufactured Housing Division (CID) of the New Mexico Regulation & Licensing Department. Applicants for a new or renewal license must provide a $10,000 contractor license bond to CID. There must be an active license bond in force at all times to maintain a valid license.

How Does a Contractor License Bond Work?

Every New Mexico contractor license bond is a legally binding contract involving three parties:

  • CID, the licensing authority requiring the bond, is the obligee
  • The contractor purchasing the bond is the principal, and
  • The bond’s guarantor is the surety.

In the event that the principal violates the terms of the surety bond agreement and causes the obligee or a consumer to incur monetary damages, the injured party can file a claim with the surety. The surety will investigate and decide whether or not the claim is legitimate. The principal is legally obligated to pay all valid claims.

However, the surety has guaranteed the bond by agreeing to lend the principal the funds needed to pay claims if necessary. So, unless the principal can come up with the money to pay the claim immediately, the obligee will pay it on the principal’s behalf. The payment to the claimant is, in fact, a loan to the principal—a loan that must be repaid according to the terms established by the surety. The surety can take legal action to recover the debt if the principal fails to repay it as agreed.

How Much Does It Cost?

The annual premium for a New Mexico contractor license bond is calculated by multiplying the $10,000 bond amount by the premium rate the surety assigns to the principal through underwriting. The primary underwriting consideration is the risk of the principal not repaying the surety for claims paid on the principal’s behalf. The lower the risk, the lower the premium rate.

The key measure of risk is the principal’s personal credit score. The higher the credit score, the lower the risk. A well-qualified principal usually pays a premium rate between 1% and 3%. A principal with a lower credit score presents a higher risk to the surety and will pay a higher premium rate.

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 Mexico 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 Mexico contractor license bond protects the state and consumers from financial harm caused by a licensed contractor. The surety bond agreement requires the contractor to operate in compliance with state laws and regulations governing the kind of contracting work they do. It also indemnifies the state against any liability for monetary damages incurred as a result of negligent or substandard work.

 

In New Mexico, contractors are licensed by the Construction Industries and Manufactured Housing Division (CID) of the New Mexico Regulation & Licensing Department. Applicants for a new or renewal license must provide a $10,000 contractor license bond to CID. There must be an active license bond in force at all times to maintain a valid license.

Every New Mexico contractor license bond is a legally binding contract involving three parties:

  • CID, the licensing authority requiring the bond, is the obligee
  • The contractor purchasing the bond is the principal, and
  • The bond’s guarantor is the surety.

In the event that the principal violates the terms of the surety bond agreement and causes the obligee or a consumer to incur monetary damages, the injured party can file a claim with the surety. The surety will investigate and decide whether or not the claim is legitimate. The principal is legally obligated to pay all valid claims.

However, the surety has guaranteed the bond by agreeing to lend the principal the funds needed to pay claims if necessary. So, unless the principal can come up with the money to pay the claim immediately, the obligee will pay it on the principal’s behalf. The payment to the claimant is, in fact, a loan to the principal—a loan that must be repaid according to the terms established by the surety. The surety can take legal action to recover the debt if the principal fails to repay it as agreed.

The annual premium for a New Mexico contractor license bond is calculated by multiplying the $10,000 bond amount by the premium rate the surety assigns to the principal through underwriting. The primary underwriting consideration is the risk of the principal not repaying the surety for claims paid on the principal’s behalf. The lower the risk, the lower the premium rate.

The key measure of risk is the principal’s personal credit score. The higher the credit score, the lower the risk. A well-qualified principal usually pays a premium rate between 1% and 3%. A principal with a lower credit score presents a higher risk to the surety and will pay a higher premium rate.

 

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Request a quote online or call today to speak with one of our surety bond experts about obtaining a New Mexico contractor license bond.