Most of the surety bonds we underwrite automatically renew yearly. Therefore, we send invoices to our clients once a year on the month their bond renews. The bond renews the same month we issued during the first year.

When clients sign the indemnity agreement, they agree to timely pay all due premiums for the entire length of the bond’s term. Failure to remit payment leads to the surety placing the client’s file into collections until they receive payment. This can negatively impact a client’s credit score and credit worthiness.

In regards to court bonds, only the court has the authority to cancel a bond. This means a surety cannot cancel a bond despite failing to receive due premiums. However, long term guardianship and other fiduciary bonds require filed annual accounting statements of the obligee’s assets. Failure to pay premium should show up in these statements and could lead to consequences for failure to pay premiums.

Certain court bonds can have their premiums readjusted throughout the bond’s term if the court orders a change in the bond penalty. If the court orders an increase in the bond penalty, the premium increases as proper. Likewise, if the court orders a decrease in the bond penalty, the premium decreases in relation to the bond. Sometimes bonds cancel pro rata, which means the principal receives unearned premium back.

Unearned premium equals the paid premium minus the premium times the percentage of the year the bond will no longer be active. For example, if a bond renewed in January but cancelled later that year in late June, the principal should receive 50% of the premium back because the bond was only active for 50% of the year.

However, it is very important to remember the first year premium is always fully earned. This is standard procedure in suretyship. Sureties cannot pro rate the first year premium.