For many new to the surety bonds industry, the renewal process can difficult to initially grasp. The purpose of this post is to shed light on the timing of renewal payments in order to prevent unnecessary confusion. Typically, invoices for renewals of surety bonds are sent to the principal months before their surety bond expires. Additionally, payments are due months prior to the bond expiration date as well. While some principals may prefer to hold off on paying for a renewal until the day the bond expires, that is not how the process works.
The language of surety bonds requires bonding companies to collect renewal premium payments well before bond expiration. For instance, each surety bond will have a “cancellation clause” that specifically states how much advance notice bonding companies are required to give principal and obligee prior to the bond’s expiration date. Most cancellation clauses require notification to be delivered in writing either 30, 60 or 90s prior to expiration. Hence, cancellation clauses must be considered when determining when payment for renewals will be due to the bonding companies, which as I previously stated can be a few months out (prior to bond expiration).
Victor Lance is the founder and president of Lance Surety Bond Associates, Inc. He began his career as an officer in the U.S. Marine Corps, serving two combat tours. As president of Lance Surety, he now focuses on educating and assisting small businesses throughout the country with various license and bond requirements. Victor graduated from Villanova University with a degree in Business Administration and holds a Masters in Business Administration (MBA) from the University of Michigan's Ross School of Business.
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Lance Surety Bond Associates, Inc. is a surety bond agency based out of southeastern Pennsylvania that is able to write all surety bond types in all 50 states. We are dedicated to servicing all of our customers' surety bonding needs throughout the country and guarantee competitive rates, timely responses, and unparalleled customer service.