What is a New Jersey Contractor License Bond?
Unlike many other states, construction contractors in New Jersey do not have to secure a statewide license in order to perform work legally. However, some municipalities do require contractors to get a license as well as a surety bond, known as a New Jersey contractor license bond. A New Jersey contractor license bond is a form of insurance for a contractor's customers, not the contractor himself.
If a licensed contractor has a bond and work performed on a contract does not go as planned, or it is not in accordance with local codes and regulations, a claim can be made against the bond. Claims against a New Jersey contractor license bond are meant to cover financial damages incurred by a contractor's customers.
Who Needs a New Jersey Contractor License Bond?
In the state of New Jersey, local licensing agencies dictate which contractors need a license and a corresponding contractor license bond. City contractors working in Jersey City and Ventnor city are required to have a New Jersey contractor license bond, as are street opening contractors working in Burlington.
The state of New Jersey may also require a bond of contractors wishing to become a master plumber or electrician.
New Jersey Contractor License Bond Obligee Details
A New Jersey contractor license bond is an agreement between three different parties. The surety company provides the bond to the licensed contractor, known as the principal of the bond. The local licensing authority is listed as the obligee of the bond, or the one mandating a bond be posted by the principal.
Because bond requirements are set by local licensing authorities and not the state as a whole, the obligee of a New Jersey contractor license bond varies from one jurisdiction to the next. Check with the local licensing authority to determine if a bond is required and who is to be listed as the obligee.
How Much Does a New Jersey Contractor License Bond Cost?
Similar to other types of surety bonds, a New Jersey contractor license bond is priced based on the amount of the bond and the credit history of the principal. Bonds for contractors in the state may be as low as $4,000, but some may be up to $15,000, depending on the type of license a contractor holds. Fortunately, a licensed contractor does not pay this bond amount out-of-pocket.
The bond price paid by the contractor is known as the bond premium. It is calculated as a percentage of the total bond amount to be secured, ranging from 1 to 10% in most cases. The surety company reviews a contractor's credit history and financial track record to determine what the bond premium will be. Contractors with bad credit can still get a New Jersey contractor license bond, but the cost may be higher than someone who has a clean financial past.
How do You Get a New Jersey Contractor License Bond?
To get a New Jersey contractor license bond, contractors should submit a brief application and quote form online. The surety company will need details about the bond amount and the type of bond requested, and a quote can be provided in most cases in a matter of minutes. Once the bond is in place and the bond premium paid, contractors should ensure their bond is renewed to stay in compliance with local laws and regulations.
