If you run a business in Arizona—even with just one employee—you must carry certain types of insurance. Arizona’s workers’ compensation laws require you to have coverage as soon as you hire your first worker, including family members.
This system protects employees by covering medical care and lost wages after a job-related injury without the need to prove fault.
Who Needs Coverage in Arizona?
Required Coverages:
Workers’ Compensation: Required for any business with employees. Sole proprietors and partners are generally exempt but can file to elect coverage for themselves. Corporate officers are automatically included but have the right to reject coverage by filing an official notice with the insurance carrier.
Arizona Commercial Auto Insurance: Required if your business uses vehicles for work. The minimum liability coverage is $25,000 per person for bodily injury, $50,000 per accident for bodily injury, and $25,000 for property damage (25/50/25).
Industry-Specific Insurance:
Construction: Must carry workers’ compensation if they have employees. While not required for state licensing, general liability insurance is a standard requirement for most contracts and is essential for financial protection.
Healthcare: Needs professional liability insurance for malpractice coverage.
Cannabis: Must have specialized coverage for product liability and regulatory compliance.
These rules protect your business from costly lawsuits and help your workers get the care they need.
What Arizona Small Business Insurance Covers
Arizona small business insurance protects your company from accidents, claims, and other operational risks.
Workers’ Compensation: Pays for medical care, lost wages, permanent disability support, death benefits, and vocational retraining. This is crucial for outdoor workers facing extreme heat.
General Liability Insurance: Covers injuries at your business (like slips during monsoons), third-party property damage, and legal defense costs. It is a must-have for retail shops and service businesses.
Professional Liability: Covers claims of mistakes and negligence—even false ones. Essential for healthcare providers, attorneys, and consultants.
Commercial Auto Insurance: Protects business vehicles used across cities like Phoenix or in remote areas. It covers accident-related damage, liability claims, and legal costs.
For businesses with large payrolls, Arizona also allows for self-insurance, which is regulated by the Industrial Commission of Arizona (ICA).
Real Risks and Common Claims
Arizona’s climate, geography, and industries create unique risks.
Heat-Related Injuries: Outdoor workers in landscaping and roofing face significant risks when temperatures exceed 115°F.
Construction Accidents: Equipment failures and heat stress lead to frequent and costly job site claims.
Monsoon Season: Sudden dust storms and flash floods can cause customer falls or building damage, resulting in general liability claims.
Claim costs vary based on the severity of the injury and location. Remote areas often have higher medical and transport costs, leading to more expensive claims.
Discover cost-saving strategies in our guide: Local Business Insurance Solutions to Save You Money.
Costs and State-Specific Factors
The cost of your Arizona business insurance depends on your industry, location, number of employees, and claims history.
Key Cost Drivers:
Industry Type: High-risk industries like construction and restaurants pay more than office-based businesses.
Number of Employees & Payroll: More workers and a larger payroll increase workers’ compensation premiums.
Location: Rates in high-traffic urban areas like Phoenix may be higher than in rural areas.
Claim History: A record of safety and few claims leads to lower premiums.
Coverage Limits: Higher policy limits provide more protection but come at a higher cost.
The Arizona Department of Insurance and Financial Institutions (DIFI) regulates the state’s insurance market, which helps keep rates competitive compared to neighboring states like California.
Claims and Legal Requirements
Following the correct claims process is key to staying compliant and ensuring your employees receive proper care.
Workers’ Compensation Process:
Injured workers must file a claim with the ICA within one year of the injury.
Employers must report the injury to their insurance carrier and the ICA within 10 days.
The employer has the right to direct the initial medical treatment for a non-emergency injury.
Wage replacement benefits begin for approved lost-time claims.
For All Other Claims:
Notify your insurer immediately after an incident.
For auto accidents involving injury, call the police to create an official report. As an at-fault state, Arizona holds the responsible party liable for damages.
For liability claims, keep detailed safety logs and preserve any security footage to support your case.
Disputes are heard by an Administrative Law Judge at the ICA and can be appealed in court.
What Happens if You Don't Comply?
Failure to secure required workers’ compensation coverage in Arizona can lead to:
Class 6 felony charges
Significant fines and penalties
Stop-work orders from the ICA
Business owners being held personally liable for all injury-related costs
Final Tips and Expert Help
Whether you’re in Phoenix, Flagstaff, or anywhere in between, the right insurance protects you from legal, financial, and environmental risks.
Action Checklist:
Ensure your coverage meets Arizona’s requirements for one or more employees.
Maintain commercial auto insurance for all business-use vehicles with the correct 25/50/25 limits.
Add general liability insurance to protect against common accidents.
Understand the workers’ compensation claims process enforced by the ICA.
Don’t risk fines, lawsuits, or financial loss. Stay compliant and covered—starting today.
Ready to protect your business? Call us at 855-718-7559
