What is the reason for the cancellation of my surety bond?
For a variety of circumstances, your surety bond could be canceled. The obligee (the agency that issued the bond) can, for example, request cancellation if they believe your company is no longer financially healthy or has broken the bond’s terms.
As a contractor, you should be aware that you have several responsibilities to meet in order to keep your bond in good standing. This involves staying away from stuff like:
-failure to keep licenses up to date
-failure to pay owing taxes and penalties in a timely manner
Suspending these compliance requirements could result in your bond being canceled. It can also lead to fines and legal action from the state, so it’s critical that you understand what these criteria are and take efforts to meet them. Failure to do so may result in the loss of your license and the cancellation of your surety bond (and possibly even facing criminal charges).
Is it possible to terminate a surety bond?
Either the obligee or the principal can cancel a surety bond. If you work as a general contractor and have handed the agency/obligee your surety bond, they may request cancellation on your behalf if they believe you are not financially sound. Unless you’re already in default, this is incredibly unlikely.
Consider the case where you are required to keep your professional license with your state board of accountancy. If you fail to do so, you may face penalties, such as fines and penalties payable to the state board of accounts, and your license may be suspended.
All of your bonds, including auto bonds, commercial bonds, and surety bonds, could be called due as a result of this suspension. Once this occurs, the only method to regain your license is to pay all outstanding fines and penalties, following which the state board may reinstate your license.
What happens if the surety bond is canceled?
If your surety bond is canceled, the first thing that may happen is that you will no longer be eligible for future contracts. This could have a major influence on your business, so try to prevent it at all costs! Any of the agencies that issued your bonds have the authority to cancel your bond and/or refuse to issue new ones to you if they believe your business does not match their standards.
If this happens, there’s not much you can do except try to show them that their concerns were unwarranted and explain how you’ve changed yourself and your organization. After that, implementing modifications to address their issues would be the next stage. You could alternatively apply for commercial bonding through a different agency or agent.
Who pays for the cancellation of a surety bond?
If your surety bond is canceled, you, as the principal, will be accountable for any payments that the bond may have covered (such as projects you’ve already begun). There may be a period of time before you have to pay anything if your bond was canceled due to financial difficulties with your company. This provides you with the opportunity to enhance parts of your business that may have contributed to the cancellation.
For example, if you go out of business and are unable to fulfill your contractual obligations after a contract is issued using your surety bond—or if someone else goes out of business as a result of you—you will be required to repay any funds or payments released up to that point under the bond’s terms.
In this instance, the surety business could use any legal measures at its disposal to collect payment from either you or your firm. Be advised that doing these steps could result in extremely severe consequences for you and/or your company.
In either case, having a bond revoked can create a lot of stress and trouble, and it can affect everything from future contracts with other agencies to the possibility of being prosecuted by the police. It’s critical to understand how relationships function and adhere to them in order to avoid all of this.
Is it possible to get a surety bond back?
If the agency/obligee cancels the surety bond, the principal receives a refund. If a bond is canceled because your company failed to follow the terms of the agreement, the bond will be destroyed and you will not be able to use it again. However, if this occurs, you can apply for other forms of commercial bonds through a separate agency (or even under a different agent).
A surety bond is repaid to the principal if it is canceled. So, if you’re the obligee, and your contractor’s surety bond was canceled because they didn’t keep their commercial license current, you’d get your money back. In contrast, if you bought a surety bond from one of our agents and they later canceled it because you didn’t pay or they didn’t follow the terms, you might get your money back.
