New Jersey Construction 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 construction bonds. If you have additional questions or want to explore bonding solutions for your business, speak with one of our knowledgeable surety bond experts.

What Is a New Jersey Construction Bond?

New Jersey construction bonds serve the double purpose of:

  1. Requiring contractors to operate in accordance with regulatory and contractual obligations and
  2. Legally obligating them to compensate project owners for monetary damages caused by contractor noncompliance

What Types of New Jersey Construction Bonds May Be Needed?

In New Jersey, contractors are not licensed by the state. But general contractors may be subject to local licensing or permitting, which often requires the purchase of a contractor license bond.

Under New Jersey’s “Little Miller Act,” contractors must purchase both performance bonds and payment bonds before they can undertake a public works or other state-funded project valued above $200,000. While private construction projects don’t fall under the Little Miller Act., private project owners often choose to require performance and payment bonds from their contractors. And both private and state or local government contracting officials may make the purchase of a bid bond by a condition for bidding on a job.

Other construction bonds that contractors operating in New Jersey may need include:

  • Maintenance bonds
  • Subdivision/site improvement bonds
  • Supply bonds
  • Solar decommissioning bonds
  • Right of Way bonds

How Does a New Jersey Construction Bond Work?

Every construction bond is legally binding on three parties, referred to in the lingo of surety bonds as the:

  • obligee—the project owner (public or private),
  • principal—the contractor legally obligated to pay valid claims, and
  • surety—the party guaranteeing the payment of claims.

The surety determines whether a claim is valid. If it is, the surety will pay it on the principal’s behalf as an extension of credit, not a gift. The surety is indemnified by the bond, so the principal’s legal obligation becomes an obligation to repay the surety. Failure to repay the debt according to the surety’s credit terms opens the principal up to legal debt collection actions on the part of the surety.

How Much Does It Cost?

The annual premium cost for a New Jersey construction bond depends on the amount of the bond and the premium rate assigned to the principal through underwriting. Any extension of credit carries the possibility that the debt will not be repaid, so that risk is the primary underwriting concern. Credit risk is measured by the bond applicant’s personal credit score.

A high credit score is evidence of low risk to the surety, resulting in a low premium rate. A low credit score, on the other hand, is a red flag for risk, so the premium rate will be higher to offset the higher risk level.

The premium rate for a principal with good credit usually is in the range of 1% to 3%.

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 construction 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 New Jersey Construction Bond?

New Jersey construction bonds serve the double purpose of:

  1. Requiring contractors to operate in accordance with regulatory and contractual obligations and
  2. Legally obligating them to compensate project owners for monetary damages caused by contractor noncompliance

 

In New Jersey, contractors are not licensed by the state. But general contractors may be subject to local licensing or permitting, which often requires the purchase of a contractor license bond.

Under New Jersey’s “Little Miller Act,” contractors must purchase both performance bonds and payment bonds before they can undertake a public works or other state-funded project valued above $200,000. While private construction projects don’t fall under the Little Miller Act., private project owners often choose to require performance and payment bonds from their contractors. And both private and state or local government contracting officials may make the purchase of a bid bond by a condition for bidding on a job.

Other construction bonds that contractors operating in New Jersey may need include:

  • Maintenance bonds
  • Subdivision/site improvement bonds
  • Supply bonds
  • Solar decommissioning bonds
  • Right of Way bonds

Every construction bond is legally binding on three parties, referred to in the lingo of surety bonds as the:

  • obligee—the project owner (public or private),
  • principal—the contractor legally obligated to pay valid claims, and
  • surety—the party guaranteeing the payment of claims.

The surety determines whether a claim is valid. If it is, the surety will pay it on the principal’s behalf as an extension of credit, not a gift. The surety is indemnified by the bond, so the principal’s legal obligation becomes an obligation to repay the surety. Failure to repay the debt according to the surety’s credit terms opens the principal up to legal debt collection actions on the part of the surety.

The annual premium cost for a New Jersey construction bond depends on the amount of the bond and the premium rate assigned to the principal through underwriting. Any extension of credit carries the possibility that the debt will not be repaid, so that risk is the primary underwriting concern. Credit risk is measured by the bond applicant’s personal credit score.

A high credit score is evidence of low risk to the surety, resulting in a low premium rate. A low credit score, on the other hand, is a red flag for risk, so the premium rate will be higher to offset the higher risk level.

The premium rate for a principal with good credit usually is in the range of 1% to 3%.

REQUEST A QUOTE

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