Overview of New Jersey Contractor License Bond Requirements
During the application process for an NJ contractor license, you will likely need to post a contractor license bond.
On a state level, applicants for an electrical contractor license need to post a $1,000 bond, and applicants for plumbing and HVACR licenses need to post a $3,000 bond.
In addition to that, the cities of Jersey, Ventnor, and Burlington also require certain contractors to post a bond. In Jersey city, contractors need to post a $15,000 bond, whereas in Ventnor, a $4,000 bond is required, and in Burlington a $5,000 bond.
What is the purpose of this bond?
The purpose of the licensing bond for contractors is to guarantee their performance and compliance with legal obligations. In issuing the bond, the surety vouches for the contractor and their reliability.
The bond also functions as protection in the case that a contractor violates their obligations under state law or under a contract. Anyone harmed by such a violation can file a claim against the bond to secure compensation. Money extended under a claim can be as much as the full amount of the bond.
For more information about the purpose of surety bonds and how they work, see our detailed ‘What is a surety bond' guide!
Learn more about the cost of the different contractor license bonds in New Jersey, and how to get bonded in the following sections!
How Much Does the New Jersey Contractor License Bond Cost?
Your surety bond premium is equal to a percentage of the total amount of your bond. Sureties determine this percentage, or rate, when they review your application, based on the financial information you provide. Several important factors determine the rate that you will be offered.
Factors that determine your bond premium
Your personal credit score is the factor that has the strongest effect on your premium. The higher your credit score, the more reliable the surety will consider you and offer you the bond at a cheaper price. If your score is lower - your rate will go up.
Applicants with high scores are usually offered a rate between 1% and 3% of their bond's amount.
To get a better picture, sureties may also review your:
- Financial statements
- Fixed and liquid assets
- Industry record
See the table below to get a sense of the different ranges of bond premiums available, based on credit score!
|New Jersey Contractor License Bond Cost Based on Credit Score|
|Bond type||Bond Amount||Credit Score|
|Above 700||650-699||600-649||Below 599|
|Electrical contractor bond||$1,000||$100||$100||$100||$100|
|Plumbing and HVACR contractor bond||$3,000||$100||$100||$100-$120||$100-$150|
|City of Jersey|
|City of Ventnor|
|City of Burlington|
|Street opening bond||$5,000||$100||$100-$150||$100-$200||$150-$250|
Can I get bonded with bad credit?
You can still get bonded, even if you have bad credit. You will likely be offered a higher rate than applicants with better scores, because sureties want additional security under such circumstances. Yet, you can significantly lower your bond rate by improving your credit score.
Find out more about getting bonded with a lower score from our Bad Credit Program page!
What Happens When a Claim Is Filed Against My Bond?
Surety bonds are legally binding agreements. A claim can be filed against a bond when the contractor has violated its conditions. These conditions include complying with state laws, such as the New Jersey Administrative Code, and any other regulations or rules that apply to a contractor.
When a claim is filed, the surety that has issued the bond will investigate the matter to determine the validity and extent of the claim. If the claim is legitimate, the surety will extend compensation to the claimants.
In return, the bonded contractor will need to repay the surety in full. Under a bond agreement, sureties only vouch for the party they are bonding but do not assume liability for any claims. Since bond claims can be costly and difficult to handle, it is best to avoid situations that may give rise to one.
Apply For Your Contractor License Bond!
To apply for your bond, simply complete the bond application form. We will then contact you with a free quote on your bond and additional details about how to complete the bonding process.
If you have any questions about getting an NJ contractor license bond, get in touch with us at (866)-450-3412!