Bond Insurance
What Is Bond Insurance?
An issuer of a bond can purchase bond insurance to guarantee scheduled payments of interest and principal on the bond to its bondholders in case the issuer defaults. Once the issuer purchases bond insurance, its credit rating is replaced with the insurer’s credit rating. Premiums are a measure of the perceived risk of failure of the issuer and are paid to the insurer in either lump sums or installments.
Bonding Requirements for Contractors in New Jersey
Under the updated Contractors Business Registration Act (CBRA), all Home Improvement and Home Elevation Contractor Businesses (HICBs/HECBs) in New Jersey must now secure compliance bonds to enhance financial accountability. These bonds provide added protection for clients and ensure contractors fulfill their obligations.
The required bond amounts are based on contract values:
- $50,000 for contracts over $120,000 or annual contracts totaling $750,000+.
- $25,000 for contracts between $10,000 and $120,000 or annual contracts between $150,000 and $750,000.
- $10,000 for contracts under $10,000 or annual contracts under $150,000.
This new requirement aims to enhance financial accountability and provide additional safeguards for contractual obligations.
What Are the Benefits of Being Bonded?
Being bonded gives issuers the ability to leverage business growth. With the increased stature of having the insurer’s credit rating, a business can feel safer in taking risks to improve and grow the business. This is especially true in the construction and financial industries.
A bonded business can obtain unbiased criticism from a credit professional and seek advice in underwriting projects.
Some Bonds We Handle Include, but Are Not Limited To, the Following:
- Contract performance bonds
- Bid bonds
- Maintenance bonds
- Payment bonds
- Supply bonds
- License and permit bonds
- Miscellaneous bonds