New Jersey Business Surety Bonds

When you hire someone to do a job, you automatically take on a couple of risks. The first is that the person or team you’ve hired will do the job correctly. The second is that they’ll do the job at all. If there’s a lot riding on a project, including your trust, money, and time, you’ll want to make sure you get compensated for it. Surety bonds exist for just this reason.

New Jersey independent insurance agents can help you find the right type of surety bond to protect your business from an incomplete project or other disaster. But before we jump too far ahead, here’s a breakdown of this important protection.

What Is a Surety Bond?

A surety bond is a special type of contract in which the surety guarantees that the second party, or principal, will fulfill the terms set with the third party, or obligee. Surety bonds can be used to guarantee a contractor's obligation to perform a job for a business or individual.

If the contractor fails to fulfill the terms, the surety bond will be paid to the owner of the property who hired the contractor. The issuer of the bond will then pursue legal action against the contractor.

How Does a Surety Bond Work in New Jersey?

Surety bonds are used for many business and personal uses, including contractual obligations, licensing and permits, bail, and more. A surety bond is designed to protect a business or individual from unfulfilled contracts that cause them harm in some way, financially or otherwise.

Once a contract is established, with a surety bond in place, the hiring business or individual, AKA the obligee, now has a guarantee that their financial investment will be fulfilled. If the hired contractor or other worker does not complete the job or completes it incorrectly, the obligee will be reimbursed by the surety bond.

What Does a Surety Bond Cover in New Jersey?

When your business hires another party to complete a project, you want a guarantee that the work will be done, and done right. Surety bonds exist to protect the business, or obligee, from incomplete projects. Surety bonds cover:

• Lost funds: If the contract is not fulfilled because the job is not finished, the business’s financial investment will be protected by a surety bond.
• Fraud/theft costs: If a worker steals from your business or commits fraud, a surety bond will help recoup these losses.
• Lawsuit costs: If the job performed damages the business in some way, such as by being completed incorrectly, a surety bond will help fund a resulting lawsuit against the contractor.

Your New Jersey independent insurance agent can help you find a surety bond that protects your business exactly the way you need it to.

Surety Bond Stats

When considering getting a surety bond, it’s helpful to see how the industry has grown over time, and how much protection they offer as a whole. Check out some surety bond stats below.

Surety bond direct written premium

The surety industry has protected more than $9 trillion in surety exposure for both contract and commercial obligations. In 2017, surety bonds provided $600 billion in protection. Since 1998, about $25 billion in losses have been paid out by surety bonds, and an additional $50 billion has been paid out for underwriting, loss adjustment, and other expenses.

The surety bond industry has provided a wealth of protection for businesses and individuals over the past couple of decades. Knowing this, it’s extremely important to consider looking into a surety bond before entering into a contractual agreement with a contractor or commercial principal.

Is a Surety Bond the Same As Insurance?

No, a surety bond is not insurance, because the bond issuer can pursue legal action after the loss has been paid. Also, insurance carriers do not sell surety bonds, which are essentially a form of credit.

With a surety bond, the principal, such as a contractor, is the one obligated to pay back the bond, not the surety itself. So, there’s no insurance company to fulfill a claim if there’s a loss.

What Types of Surety Bonds Are Available in New Jersey?

When browsing your options for surety bonds, you’ll want to select the type that best meets your business or personal needs. There are many types of surety bonds available in New Jersey, and many different options for the amount of coverage. Here are some of the most common:

Make sure to research each type of surety bond available in your area before choosing the option that works best for you.

Here’s How a New Jersey Independent Insurance Agent Can Help

When it comes to protecting businesses and individuals against unfulfilled contracts, no one’s better equipped to help than an independent insurance agent. New Jersey independent insurance agents can help provide you with the best coverage and rate options. They’ll assist you in your search for the best surety bond that fits your budget and ensures that the job gets done right.