- June 13, 2022
- Posted By:hmvreeland
- Category:Surety Bonds
There are situations when a principal after securing a surety bond in Los Angeles may find out that they no longer need it. Many principals wonder if their surety bond can be refunded in these situations. The short answer – It depends!
Common Situations When a Principal May Want a Surety Bond Refund
➢ They secured their bond and decided not to apply for a license
➢ They purchased their bond but later found out that a bond is not required
➢ They purchased their bond and applied for a license, but the process is taking too long and they decide to give up
➢ They purchased the wrong bond type and now want a refund to get the right type of bond
➢ They secured their bond and were denied a business license
➢ They closed or sold their business after purchasing their bond
➢ They found the lost instrument after purchasing their Lost Title bond
➢ They decide to back out of the agreement and cancel their bond before a renewal period
When is a Principal Eligible for a Surety Bond Refund?
When a Principal purchases a bond, they pay the premium for an entire year upfront. If a principal decides six months after purchasing a surety bond that they no longer need it, they will still have paid for another six months.
Of course, the Principal can decide not to renew coverage once it expires. It is entirely within the Surety’s discretion to approve or deny Surety bond refunds. Usually, surety bonds are non-refundable during the initial year. However, some Sureties may make an exception in certain cases.
Here are some examples of instances where a refund may be possible:
➢ The Principal obtained the bond but never submitted it to the Obligee. In this case, the agreement never technically went into effect and the Surety may (but is not obliged to) accept the Principal’s request for a refund after returning the original unused bond.
➢ The Principal has paid in advance to have their bond renewed but later decides to cancel their bond once it expires.
➢ The Principal decides to cancel their bond before it expires. In rare circumstances, sureties may agree to a prorated refund.
As already discussed, Sureties have full right to refuse refunds. They also have the right to issue a partial refund. When a surety issues a refund, they will want the bond back – meaning the coverage will end immediately.
Steps to Obtaining a Surety Bond
1. Fill out a bond application form.
2. Allow the Surety to run a credit check. The premium depends directly on your credit score and the type of bond. A good credit score will result in a low premium and vice versa.
3. Complete additional documentation on Surety’s request.
4. Once the Surety assesses your credit history, they will provide a customized quote.
5. Pay the premium and sign on the dotted line.