Contractors bidding on high-worth construction projects are often required to qualify for a surety bond in order to win the contract. A surety company in New Jersey typically offers several types of bonds to cover different aspects of the project.
When Does a Contractor Need a Surety Bond?
Government agencies may be statutorily required to contract only with construction companies who qualify for surety bonds to protect taxpayer value in public assets. Private owners, lenders and general contractors also periodically require bonds to transfer their risk to an insurer.
What Can Be Covered by Surety Bonds?
Bonds often cover different segments of the project depending on the asset owner’s requirements.
- Performance bonds insure the owner from financial losses if the project is not completed according to the contract terms.
- Payment bonds cover the owner’s risk that the contractor will not pay certain subcontractors.
- Labor and materials bonds cover the risk of non-payment by the contractor for labor, materials, services and equipment.
- Maintenance bonds guarantee the work for a specified period of time after completion of the project.
Who Takes the Risk?
When a bond is issued to a contractor, the surety company in New Jersey takes the financial risk to ensure the applicable portion of the project meets contractual obligations. Bonding helps protect high-worth assets and projects.