How to get rid of surety bonds and why you should

“How can I miss you if you don’t go?”

Performance bonds are issued by insurance companies, but they are not insurance policies. When you reach the end of your auto insurance, it will expire if it is not renewed. In addition, the company can cancel it in the middle of the year. Boom, it’s done! Insurance policies are not “forever.”

With surety it is different. First of all, they are harder to come by. So when you finally have it, they do not expire! And the surety company cannot cancel a performance bond. Then how to do they finish?

The fact is, people focus on obtaining surety bonds because they are a required element of many transactions, but they think little about getting rid of the bond, eventually. Let’s go over why you want to close a performance bond and how to do it.

Each performance bond is married to a written contract that is identified in the first part of the bond. They are married to death, until the contract is completed. If you have a two-year contract covered by a performance and payment bond, you have a two-year bond, unless the contract is extended. If the contract is modified for a period of 25 months, the deposit automatically follows. If the dollar amount of the contract is increased, the bond automatically follows. The purpose of the surety is to guarantee the satisfaction of the Obligor (the beneficiary of the surety) with the performance of the contract. Therefore, the surety remains in effect until the obligee / contract owner accepts the entire contract.

To settle the bond obligation, a release or acceptance of the contract by the obligee is required. The applicant / principal (contractor) cannot cancel or close the bond. Only the obligor can end it.

Final test it may consist of a Status Inquiry form completed by the obligee. The questions would be:

If the project IT IS finished:

End date: ___________ Acceptance date: _____________ Final contract amount: $ ___________

If the project IT IS NOT finished:

Approximate percentage or dollar amount completed: $ _____________________________

Describe any disputes or performance issues on the project: _______________________________

Do you know of any unpaid invoices for labor or materials? ____ No ____ Yes If yes, please describe: _____________________

Current Estimated End Date: ____________________________________

Now that we know excuse me to close a performance bond, why bother doing it? There are very good reasons …


  • The surety (surety company) will conclude the liability on its books when the surety is released.

  • They also immediately earn all the remaining bonus. Those are two good reasons!

Contractor / Director

  • That part of the company’s bonding ability will be restored to support a new contract. This helps them qualify for more projects and bigger projects. That is the source of your business income.

  • When complete, the project is added to the company credentials. They can now list the contract as a successfully completed job. This is how your resume is built.

  • The applicant business, its owners and spouses have a legal liability arising through the severance agreement (a liability waiver issued to protect the bond). It is literally a responsibility that must be disclosed in your financial statements. When the bonds are released, this business and personal liability ends.

The binding agent

  • The agent also wins because more bonds can be issued. And this is how they make a living.


Everybody You win when the job is closed and the bond is released. This is a necessary process that should not be ignored.

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