New Jersey Home Improvement License Bond

A compliance bond guarantees that contractors follow state laws and regulations while performing their work. When they secure a compliance bond, contractors enter into a three-party agreement.

• Principal: The contractor required to obtain the bond.
• Obligee: The New Jersey Division of Consumer Affairs (requires the bond)
• Surety: The company that issues and backs the bond

If a contractor fails to comply with state laws or contractual obligations, affected parties can file a claim against the bond. The surety company will compensate the claimant up to the bond’s value, and the contractor must then reimburse the surety for the paid amount.

One benefit to contractors of providing a surety bond is having a claims examiner involved if someone tries to make a claim on the bond. The claims examiner will determine if it’s a rightful claim. If an irrevocable letter of credit or a cash deposit is used (alternative forms of security), there would be no claims examiner to determine whether the claim is valid.

Compliance bonds in New Jersey are typically valid for one year, aligning with the state’s annual contractor registration cycle. Contractors must renew their bonds annually to maintain continuous compliance and legal operation.

The required bond amount is based on the value of your contracts over the past 12 months or anticipated earnings for the upcoming year:

• $50,000 bond: For contracts over $120,000 or total annual work valued at $750,000 or more
• $25,000 bond: For contracts between $10,000 and $120,000 or total annual work between $150,000 and $750,000
• $10,000 bond: For contracts under $10,000 or total annual work valued at less than $150,000

For more detailed information, refer to the official notice from the New Jersey Division of Consumer Affairs.

The cost of obtaining this bond varies, but ZipBonds has rates starting as low as 1% of the required bond amount. For instance, a $10,000 bond might cost $100, while a $50,000 bond could be $500 at a 1% rate. Your credit score and financial history can influence the premium rate.

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To operate legally in New Jersey as a home improvement or home elevation contractor, follow these steps.

1. Register your business.

Ensure your business is registered with the state.

2. Obtain necessary insurance.

• Commercial general liability insurance: Minimum of $500,000 per occurrence for home improvement contractors and $1,000,000 per occurrence for home elevation contractors.
• Workers’ compensation insurance: Required unless exempt under state law.

3. Secure a compliance bond (or other form of security).

Obtain a bond in the appropriate amount based on your contract values. 

4. Complete the application.

Submit the Home Improvement Contractor Application or the Home Elevation Contractor Application for Initial Registration to the New Jersey Division of Consumer Affairs. 

For detailed information and application forms, visit the New Jersey Division of Consumer Affairs website. 

If you have an existing registration, it will expire on March 31. You may renew your application and apply for your compliance bond starting in January 2025. We encourage you to start the process sooner rather than later in case any hiccups arise in the application process.

Learn more about new requirements for contractors.