Are bonds refundable if I cancel them?

Complete Guide to Commercial Bond Refunds and Cancellations

Why This Question Matters for Colorado and Utah Residents

Bond refunds impact business cash flow and regulatory standing. In Colorado and Utah, bonds are a standard part of the commercial landscape, with 37% of contractors and many service providers required to maintain active bonding. Not knowing your options on cancellation could mean leaving hundreds—or even thousands—unclaimed, or risking regulatory penalties by cancelling incorrectly.

• Important for your bottom line: Bond premiums range from $500 to $3,000+/year per $100,000 coverage, so knowing if you can recover any funds can directly affect your operating budget.
• Local regulations require notice: Colorado and Utah typically require a 90-day written notice for commercial bond cancellation, not just a simple halt or refund request. Missing this can affect your license or project status.
• Surety practices vary by region: National and regional surety carriers use different refund criteria. Some bonds have a “minimum earned premium,” meaning even if you cancel, you may not receive a full refund.

What Most People Get Wrong

Many believe cancelling a bond is like cancelling other insurance—with automatic pro-rata refunds for unused time. In reality, many surety bonds, especially commercial and contractor bonds, are non-refundable or have a minimum earned premium.

Some also overlook the proper cancellation process, such as providing the legally required 90-day notice. This can leave bonds in force (with no refund due) or cause regulatory headaches.

The Complete Picture

Commercial bonds are financial guarantees—once issued, they involve risk exposure to the surety company for the full term of the bond. Because of this:

Most standard commercial, license, and permit bonds in Colorado and Utah are written as “fully earned” upon issuance. If you cancel after payment, no refund is due—regardless of when you cancel. Some sureties may offer a partial refund if your contract or their underwriting allows, but this is rare and typically only for longer-term bonds.

Some exceptions: Bonds issued for multiple years, high-value, or unique contracts may have provisions for a partial refund of the unused term—minus a minimum earned premium (usually 1-2 months).

Always request a cancellation in writing and confirm with your bond agent or surety. State law (in both CO and UT) requires most cancellations to be processed only after the proper 90-day notice has been sent to the relevant authorities. Until then, you are responsible for the bond and premium.

If in doubt, ask your FoCoIns advisor to review your bond terms before making cancellation decisions to ensure you receive any eligible refund and remain in compliance with all rules.

Making the Right Decision for Colorado and Utah Residents

Question 1: What refund policy applies to my specific bond type and surety?

Carefully review your bond agreement. Policies vary—some commercial bonds are refundable, some are not, and many have non-refundable minimum premiums.

• Contact your surety or agent before acting. Ask about minimum earned premiums or non-refundable policies (these are common in Colorado/Utah markets).
• Check if you must provide a 90-day cancellation notice to state or municipal authorities (required for most bonds).

Question 2: Will cancelling affect my business license or contracts?

Some bonds are linked directly to your license or a specific project. Cancelling too soon can cause revocation or contractual penalties—especially in construction or for public adjusters.

• Coordinate cancellation timing to avoid business interruptions.
• Consult your local regulatory body or your FoCoIns advisor about safe timelines.

Question 3: Will I owe any cancellation fees or face non-refundable costs?

Ask about minimum earned premiums—most sureties in Denver, Fort Collins, and Salt Lake City require at least one or two months’ premium to be non-refundable, even for mid-term cancellations. Clarify any admin or processing fees as well.