Surety Bond Cancellation Guide - Obligee Permission Required

If you ended up on this page, it’s likely due to your surety bond containing a “Needs Release” cancellation clause. It sounds complicated, but this simply means that your bond may not be cancelled by you or the surety provider (Jet Insurance Company) without first receiving permission to do so from the entity that required the bond in the first place, better known as the Obligee. 

This type of cancellation requirement usually applies to surety bonds for permitted work, such as sidewalk repairs, demolition work, operating a temporary storefront, etc. To ensure permit regulations are met and the regulator/public are financially protected from damages, a surety bond is often required. 

Once the permitted work has been completed and work approved by the regulator, Jet will receive notice to terminate the bond and its liability will be officially released within a specified timeline. 

In cases where early cancellation is granted, the regulator will give notice to Jet that the bond may be terminated and its liability will be released within a certain amount of time (i.e. immediately or within 30 or so days).

However, if you are looking to cancel the bond before the permit obligation has been met this might not be possible without special permission to do so. If work is continuing, then a new bond must or other financial security must be ready to replace the bond. 

The reason why you can’t easily cancel the bond, whether to avoid a renewal or get a return of premium, ties into why the bond is required. The Obligee wants a financial guarantee the project will be done and until the project is done the bond must remain active. The permit holder cannot escape their contracted responsibility and additionally end the financial safeguard the obligee put into effect in the first place.

Likewise, Jet Insurance Company or any other surety company cannot cancel the bond without a release from the Obligee. Oftentimes you will see a required minimum premium or multiple years required up front to pay for the bond. This is required to cover the anticipated length of the contract and the risk to pay damages up to the bond’s limit should a claim occur. For better or worse the permit holder and the surety company are roped together until the permit is completed.

Jet’s Cancellation Process

If you are seeking cancellation before your surety bond’s original term has been met, a written request must be sent to Jet at [email protected]. Once received, a Jet team member will send a petition for the bond’s cancellation to the regulatory agency. If granted, Jet will officially terminate the bond upon receiving the regulator’s permission for the release of further liability. 

Jet cannot provide refunds for one-year bond terms that are cancelled early if that first year’s premium is fully earned. As mentioned before, enough premium must be collected up front for the risk present for the entirety of the project.

However, if the project has gone longer than expected and you have renewed this surety bond (thus adding extra premium to the overall risk assessment) Jet will provide you with a prorated refund once released by the Obligee if appropriate. For example, you renewed the bond for an additional year, but completed the project and got released in six months. In that case, you will receive half of the paid premium for the renewed term. A check will be sent to you by mail as soon as the bond has been officially released by the regulator. 

If you have any further questions, feel free to give us a call at 855-296-2663 and a Jet team member will help you out right away.