The Surety Bond Renewal Process
For many new to the world of surety bonds, the renewal process can be slightly surprising. These short paragraphs should shed some 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 bonds 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).