If you own a business requiring a surety bond, you need to understand how the bond renewal process works. Before a surety bond expires, it must be renewed to remain in effect after the original term ends. If your surety bond expires prematurely, you may be unable to finish a job or maintain your license to work.
The renewal process is relatively simple, but understanding the steps involved will help ensure that your bond is renewed on time and without any problems.
In today’s guide, we’ll explain what surety bond renewal is, how it works, and answer some frequently asked questions about the process.
What is surety bond renewal?
Surety bond renewal is the process of extending the term of a surety bond. Surety bonds are typically required for a specific period, ranging from one to several years.
The renewal process usually begins several months before the bond’s expiration date. The surety company will send the principal (bondholder) a renewal notice that includes information about the renewal premium, the new bond term, and other relevant details. The principal must then pay the renewal premium and sign the renewal agreement.
Once the renewal agreement is signed, the surety company will issue a new bond effective for the new term. Then the principal can submit the new bond to the obligee (the party that required the bond in the first place).
What happens when a surety bond expires?
When a bond expires, it is no longer valid, and the surety company is no longer obligated to pay any claims made against it. To keep the bond in effect, the principal must renew the bond with the surety company on time – typically once a year. The expiration date will be listed on the original bond form.
How does the surety bond renewal process work?
The surety bond renewal process can vary depending on the type of bond and the surety company that issued it. Here are the general steps:
- The surety company/surety agency sends the principal a renewal notice several months before the bond expires.
- The principal pays a renewal premium and signs the renewal agreement.
- The surety compa.
- The surety company issues a new bond effective for the new term or simply keeps the current bond in place depending on the bond form requirements.
- The principal submits the new bond to the obligee.
It’s important to note that the renewal process may require additional information or collateral. For example, the surety company may request financial statements, credit reports, or other documentation to assess the bondholder’s financial stability. Sometimes the surety company may also require additional collateral to renew the bond, such as a letter of credit or a cash deposit.
Typically, however, renewal is quick and straightforward. The surety will send a renewal notification, and the applicant can quickly apply and get approved.
How do I know if my bond is up for renewal?
The surety company should send the principal a renewal notice at least a couple of months before the bond expires. The renewal notice will include information about the renewal premium, the new bond term, and other relevant details. If the surety company does not send a renewal notice, the principal should contact the surety company to inquire about the renewal process.
Your original surety bond agreement should include information about the bond’s upcoming expiration date and the renewal process. If you’re unsure of your requirements, you can contact the surety company that issued you the bond for more information.
Frequently Asked Questions
When should I renew my bond?
It’s important to renew your surety bond before it expires to ensure that you maintain coverage. You should start the renewal process at least 30 to 60 days before your bond’s expiration date to allow enough time for the surety company to review your application.
How much does bond renewal cost?
The cost of bond renewal varies depending on the type of bond and the surety company that issued it. Renewal fees often range from a hundred dollars to several thousand dollars. The surety company may also require additional information or collateral to renew the bond.
Can I cancel my surety bond?
Yes, you can cancel your surety bond, but you must follow the terms of your agreement to do so. Some bonds may require a notice period before cancellation. There may be penalties or fees associated with canceling the bond before its expiration date. Contact your surety company to learn more about the cancellation policy.
Apply for the Contract Bonds You Need Today
To learn more about our surety bond services or to apply for a bond, contact ZipBonds today. Our team is here to help you find the right surety bond for your business and provide the support you need throughout the renewal process. You can contact us via email or call (888) 435-4191 to speak with an agent.