A bond is not insurance
This is the single most important thing to understand about bonds. Insurance is a two-party agreement: you pay a premium, the insurer pays your losses. A surety bond is a three-party agreement: you (the principal), the entity requiring the bond (the obligee), and the surety. The surety guarantees to the obligee that you will perform a contract or comply with a law. If you fail, the surety pays the obligee — and then you have to reimburse the surety. There is no 'loss' the surety absorbs on your behalf the way an insurer does.
Types of bonds roofing contractors actually need
LICENSE BONDS are required by some state contractor licensing boards as a condition of holding a roofing license — Arizona requires $4,250–$30,000, California requires $25,000, Minnesota requires $15,000, Nevada varies. BID BONDS guarantee that if you win a bid, you'll actually sign the contract and post the required performance bond. PERFORMANCE BONDS guarantee you'll complete a specific project according to the contract terms. PAYMENT BONDS guarantee you'll pay your subcontractors and suppliers on a project. Bid, performance, and payment bonds are mostly required on public-sector and large commercial projects, not residential.
Bond pricing and what affects it
Bond premiums are typically 1% to 3% of the bond amount per year for contractors with strong financials and good credit. A $25,000 license bond might cost $250 to $500 per year. Larger performance bonds — $100,000 and up — are underwritten more like a credit decision than an insurance decision. The surety wants to see CPA-prepared financial statements, work-in-progress schedules, and personal financial statements from the owners. Bad credit, recent claims, or thin financials can push the rate higher or require collateral.
Bonding capacity
If you plan to grow into commercial or public-sector work, building bonding capacity early matters. Sureties give you a single-job limit and an aggregate limit based on your financials. Working with a surety from your first $25,000 license bond and showing clean year-over-year growth makes the eventual jump to a $500,000 performance bond much easier. Switching sureties every year because you shop only on price hurts your ability to grow capacity later.