How to Get Rid of Surety Bonds and Why You Should

“How can I miss you if you don’t go away?”

Performance Bonds are issued by insurance companies – but they are not insurance policies. When you get to the end of your auto insurance, it will expire if not renewed. Plus, the company can cancel it in the middle of the year. expansion, it’s done! Insurance policies are not “forever.”

With surety bonds it’s different. First off, they’re harder to get. Then, when you finally have it, they don’t expire! And the bonding company can’t cancel a performance bond. So how do they end?

The fact is, people focus on getting surety bonds because they are a mandatory component of many transactions, but they think little of getting rid of the bond – ultimately. Let’s go over why you want to close out a performance bond, and how to do it.

Every performance bond is married to a written contract that is identified in the first part of the bond. They are married until 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 amended to a term of 25 months, the bond automatically follows. If the contract dollar amount is increased, the bond automatically follows. The point of the bond is to guarantee the Obligee’s (the beneficiary of the bond) satisfaction with the performance of the contract. So the bond remains in force until the obligee / contract owner accepts the completed contract.

To close out the surety’s obligation, a release or acceptance of the contract by the obligee is needed. The applicant / principal (contractor) can’t cancel or close the bond. Only the obligee can end it.

Closing evidence can be make up of consistently a position Inquiry form completed by the obligee. The questions would be:

If the project IS completed:

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

If the project IS NOT completed:

Approximate percentage or dollar amount completed: $_____________________________

Describe any disputes or performance issues on the project: _______________________________

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

Current estimated completion date: ____________________________________

Now that we know how to close out a performance bond, why bother to do it? There are some very good reasons…

The Surety

  • The surety (bonding company) will conclude the liability on their books when the bond is released.
  • They also closest earn all the remaining premium. Those are two good reasons!

The Contractor / Principal

  • That portion of the company’s bonding capacity will be restored to sustain a new contract. This helps them qualify for more projects and larger ones. That is the source of their company revenues.
  • When completed, the project is additional to the company’s credentials. They can now list the contract as a successfully completed job. That’s how their begin again is built.
  • The applicant company, it’s owners and spouses have a legal liability that arises by the indemnity agreement (a keep up harmless issued to protect the surety.) It is literally a liability which must be disclosed on their financial statements. When the bonds are released, this company and personal liability ends.

The Bonding Agent

  • The agent wins too because more bonds can be issued. And that’s how they make their living.


Everybody wins when the job is closed out and the bond gets released. This is a necessary course of action that should not be ignored.

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