We often get questions about surety bond refunds. When people enter into a surety bond agreement, which is both legally binding and subject to certain costs, they want to know exactly what that agreement entails. Specifically, they want to know if you can cancel a surety bond, whether they can get a surety bond refund, and under what conditions. Those are all important details to understand, and we cover them in detail in this blog.
Situations Where You Might Want a Surety Bond Refund
Most people obtain surety bonds because they are required to, either as part of the process to get a business or professional license, or when they are finalizing a contract with a client. Since surety bonds are obligatory in all these cases, you may wonder why someone would want to back out of the agreement and seek a refund. There are a few common instances where this comes up:
- You get a bond for a professional license but decide against applying for a license.
- You apply for a license but decide the process is too long or complicated and elect to revoke your application.
- You apply for a license but get rejected by the state licensing agency.
- You obtain a bond for a business that ends up closing within one year.
- You get the wrong kind of bond and need to get a new one.
- You get a bond that is not actually required.
- You decide to end bond coverage before a renewal period.
These situations happen more often than you might expect. Many people end up paying for bonds that they later decide they don’t need. That raises an obvious question, “Can I get a full or partial surety bond refund?” The answer: it’s complicated.
When Are You Eligible for a Surety Bond Refund?
Let’s cover some bonding basics first. When you sign a surety bond agreement, you typically need to pay a premium for an entire year of coverage. Therefore, if you decide to end bond coverage six months after getting a bond, you have already paid for another six months.
This is relevant because when you obtain a bond it’s considered “fully earned.” Basically, that means you are committed to the full period of bond coverage from the moment coverage starts. As a result, you are not eligible for a refund under almost any circumstances. You can, of course, opt not to renew your coverage when it expires annually. However, you probably cannot get a surety bond refund for a premium you have already paid but no longer want.
The surety company that issues and underwrites the bond has full discretion of when to issue or deny surety bond refunds. Since the terms of the contract are clearly spelled out at the time of signing, including the refund policy, it is rare to receive money back. But it’s not unheard of.
Instances where a refund might be possible include (but are not limited to) these examples:
- You obtain a bond but never submit it to the obligee. Since the bond agreement never technically went into effect, a surety may (but is not obligated to) issue a refund.
- You cancel a bond before it expires. Though it is very rare, some bond providers will agree to a prorated refund.
- You have paid in advance for a renewal term but decide to end coverage once it expires. The surety will generally refund the prepaid but unused renewal premium in that case.
It bears repeating that refunds are never guaranteed. The surety has broad rights to refuse refunds. They also have the right to issue partial refunds, so you may get less than you feel entitled to. And when a surety does issue a refund, they will require the bond back as well, meaning that bond coverage will end immediately. Loss of bond coverage can put any agreement that mandates coverage (license, contract, etc.) in jeopardy. These details are all important to consider before obtaining a surety bond.
How to Obtain a Surety Bond
Now is a good time to offer a quick rundown for obtaining a surety bond. This will help you get a sense of the time and cost involved with getting a bond. Knowing that, and knowing that surety bond refunds are highly-unlikely, helps you make an informed decision about whether to pursue a bond. The application process will vary depending on the surety bond type and the bond company, but these steps are standard:
- Complete a standard bond application with info about your business, finances, and background. Business partners will also need to complete an application.
- Agree to undergo a credit check. Your credit will affect the size of the bond premium. Higher credit scores result in lower premiums and vice versa.
- Provide additional documentation at the surety’s request. This could include a copy of the bond requirements or a financial statement.
- Receive a personalized quote for the bond premium. Typically, surety bonds cost a small percentage of the required coverage amount – less or more depending on credit.
- Pay the premium and sign the bond documents. Most bonds have a 12-month term (though longer or shorter is possible). The bond documents commit the signer to paying for a full year of coverage upfront. As discussed, they also leave little room for refunds.
How to Pursue a Surety Bond Refund
If you have read all the information outlined above and still feel you have a valid reason to get a refund, contact the surety directly. A customer representative can walk you through the next steps.
Viking Bond Service – Surety Bonds for Everyone
At Viking Bond Service, we take the customer-first approach. We strive to make bonding easy and affordable for every bond seeker and make bonding more accessible with our bad credit surety bond program, which helps people get bonds in spite of credit issues. To get a sense of what we can offer, request a quote. It costs nothing and comes with no obligation. It’s just to help you explore what the bonds you need will cost. Contact us or call 1-888-2-SURETY (1-888-278-7389).