What is a New Mexico Contractor License Bond?
Several states and municipalities require contractors working in plumbing, heating, and construction to obtain a license to do business. One requirement of the licensing process is securing a contractor license bond. A New Mexico contractor license bond is necessary for contractors working in the state, as it safeguards customers, employees, and the municipality from fraud, non-payment, and projects that do not meet building codes.
A New Mexico contractor license bond is a contract between three parties. The principal is required to obtain the bond, while the surety company provides the bond as a form of credit. The obligee is the state or local licensing authority that requires the bond to be posted.
What Does a New Mexico Contractor License Bond Cost?
A New Mexico contractor license bond of $10,000 is required for licensing in the state, but contractors are not responsible for paying the full bond amount. The surety company providing the bond charges a small percentage of the bond total, typically between 1 and 10% of the bond.
The percentage you pay, known as the bond premium, is determined based on your personal credit history. Contractors who have had issues like bankruptcy, court judgments, or tax liens in the past are a greater risk to the surety company. A higher bond premium is charged to help offset that risk. This is because bond claims are initially paid by the surety company, but you as the contractor are responsible for repayment for any legitimate claims.
How Do I Get a New Mexico Contractor License Bond?
You can easily start the process of obtaining a New Mexico contractor license bond by submitting a brief online application. Here you provide details about your contractor license, your business, and your finances. After reviewing the application, the surety company provides a quote for your bond premium.