Government agencies or private sector businesses commonly require contractors to purchase performance bonds for work that puts taxpayer or shareholder investment at risk. Companies that construct or repair high-worth assets such as buildings or transportation infrastructure are regularly required to submit surety bonds in NJ as part of the bidding and contracting process.
Value of Requiring a Surety Bond
For the property or asset owner, the value of requiring contractors to provide a performance surety bond is that the owner will be compensated by the guarantor if the project is not completed per the provisions of the contract. Performance must be precisely defined in the contract, so all parties understand when coverage applies. Only a property owner or lender can typically make claims against the bond for actual or future losses.
Information Needed to Qualify for a Bond
Depending on project size and cost, contractors normally submit an application and at least two years of financial statements prepared by a CPA. The insurer reviews the contract to confirm it meets requirements for language specificity regarding project completion. Detailed information about the property or asset may also be required.
Benefits of Surety Bonds
Asset owners can feel more assured that their projects will be successfully completed when contractors qualify for performance surety bonds in NJ. They transfer the risk of financial loss due to non-completion to the insurer by requiring the contractor to qualify for a bond.