April 27, 2006 by Michael Weisbrot
Surety bond renewal invoices are usually sent months prior to the actual bond expiration. Most new to suretyship are surprised to find out that the due date for payment is also months prior to the bond expiration, rather than the day of. Obviously, there is a reason for this. The bonding companies are not simply trying to bill the principal early.
Surety bond renewal premium payments must be collected early due to the language of the bonds. The “cancellation clause” in the bond form determines how much notice the bonding company must give the obligee prior to canceling a bond. A typical cancellation clause requires that the bonding company notify the principal and the obligee of cancellation in writing within 30, 60 or 90 days. Therefore, payment due dates for renewals must take cancellation clauses into consideration. Otherwise, a principal could remain bonded past the period they have paid for.
