You should be fully aware of how a surety bond can best help you. Whether you are looking to secure or have already secured surety bonds in NJ, there are 5 key things that you should know.
1. Purpose of a Surety Bond
In short, a surety bond is an agreement provided by a third party between an owner and a contractor that insures the work associated with a contract.
2. Main Types of Surety Bonds
There are 3 main types of surety bonds:
- Bid: assures the contractor will complete the contract
- Performance: protects the owner if the contract is not fulfilled
- Payment: assures the contractor will pay for certain labor and material costs
3. Required Surety Bonds
Some federal construction contracts, as well as some service and supply contracts, require bonds. Check with your local regulation board for the requirements for surety bonds in NJ.
4. Contractor Qualifications
Contractors must meet some strict requirements, which include:
- References and a good reputation
- Experience with similar contracts
- Excellent credit history
- Financial stability and proper equipment to support the contract
5. The Claim Process
The owner must formally declare the project in default, at which time an investigation is conducted. If the contract is found to be in default, the contractor is mandated to rectify the contract or pay the penal sum to the owner.
These 5 key things can help you to properly navigate your surety bonds.