What is a New York Contractor License Bond?
Like many other states, construction contractors working in New York may be required to get a license to perform work in certain jurisdictions. The contractor licensing process often includes a requirement to post a surety bond, known as a New York contractor license bond. This bond works as a promise to a contractor's customers that work will be performed as agreed, and in-line with state or local regulations and codes.
If a contractor fails to do the work he or she promised, a claim can be made against a New York contractor license bond by the parties involved. Claims help cover financial damages incurred due to faulty or fraudulent work.
Who Needs a New York Contractor License Bond?
Not every contractor in the state of New York is required to post a surety bond as part of their licensing requirements. However, many construction contractors must provide proof that a bond is in place before work can begin on a new project.
For instance, home improvement contractors working in New York City are required to secure a New York contractor license bond. The same is true for sewer and drain opening contractors working in Hempstead, and plumbing contractors completing projects in Westchester.
New York Contractor License Bond Obligee Details
New York contractor license bonds are an agreement between the contractor, known as the principal of the bond, the obligee, which is the licensing authority requiring a bond to be in place, and the surety company providing the bond. The obligee information for a New York contractor license bond varies depending on where the contractor is licensed and where he or she plans to complete projects.
How Much Does a New York Contractor License Bond Cost?
Like other surety bonds, a New York contractor license bond varies in price based on certain factors. First, the bond amount that is required of a licensed contractor plays a role in bond pricing. A licensed contractor may be required to post a bond of $2,000 or up to $25,000, depending on location and licensing. However, this bond total is not the cost of the bond itself.
Instead, the surety company providing the New York contractor license bond calculates the bond price as a percentage of the bond total. For most New York contractor license bonds, this price, known as the bond premium, ranges from 1 to 5% of the bond amount that must be secured. The surety company takes on risk when issuing a bond, and so a credit check is often required as part of the application process. Contractors with bad credit will likely pay a higher bond premium than contractors who have a clean financial track record.
How do You Get a New York Contractor License Bond?
Securing a New York contractor license bond is a straightforward process that begins with submitting a quote request online or over the phone. Licensed contractors provide details about the bond type and amount they need, and then the surety company determines if a credit check is required. Once an application is submitted, the bond details are provided to the contractor. Some New York contractor license bonds must be renewed each year or in-line with the contractor's license term.