Arizona small business insurance requirements: workers' compensation from the first hire, 25/50/15 auto limits and contractor bonds

Arizona: what the state requires of a small business

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In Arizona, every employer with one or more employees, full-time or part-time, must carry workers' compensation through the Industrial Commission's rules; registered vehicles need at least $25,000 per person, $50,000 per accident and $15,000 property damage liability since July 1, 2020; and licensed contractors must file a surety bond with the Registrar of Contractors and show workers' compensation coverage when they have employees.

Reviewed by CoverMatch licensed agents, Licensed property & casualty agents · Reviewed Oct 11, 2026 Updated Oct 30, 2026

Arizona rules with sources
Topic	The rule in Arizona	Source
Workers' compensation	Every employer that regularly employs one or more workers, full-time or part-time, must secure workers' compensation with an authorized carrier or as an approved self-insurer. Sole proprietors and partners without employees are not required to cover themselves; corporate officers and LLC members are covered unless they reject coverage in writing.	A.R.S. § 23-902 and § 23-961; Industrial Commission of Arizona — Employer coverage
Penalty for being uninsured	An employer that fails to carry coverage is liable for the injured worker's benefits, can be assessed civil penalties by the Industrial Commission, and the worker may sue in court instead of accepting compensation benefits.	A.R.S. § 23-907; Industrial Commission of Arizona — No Insurance Section
Auto liability minimums	Bodily injury $25,000 per person / $50,000 per accident and property damage $15,000 for policies issued or renewed on or after July 1, 2020 (Senate Bill 1087 of 2019 raised the limits from 15/30/10).	A.R.S. § 28-4009; Arizona Department of Transportation — Mandatory insurance
Contractor licensing	Contractors must hold a Registrar of Contractors license; the license takes effect only once a surety bond sized to the classification and annual volume is filed, residential licensees also pay into the Residential Contractors' Recovery Fund, and applicants with employees must provide a certificate of workers' compensation insurance.	A.R.S. § 32-1152; Arizona Registrar of Contractors — Bond information

Topic

The rule in Arizona

Source

Workers' compensation

Every employer that regularly employs one or more workers, full-time or part-time, must secure workers' compensation with an authorized carrier or as an approved self-insurer. Sole proprietors and partners without employees are not required to cover themselves; corporate officers and LLC members are covered unless they reject coverage in writing.

A.R.S. § 23-902 and § 23-961; Industrial Commission of Arizona — Employer coverage

Penalty for being uninsured

An employer that fails to carry coverage is liable for the injured worker's benefits, can be assessed civil penalties by the Industrial Commission, and the worker may sue in court instead of accepting compensation benefits.

A.R.S. § 23-907; Industrial Commission of Arizona — No Insurance Section

Auto liability minimums

Bodily injury $25,000 per person / $50,000 per accident and property damage $15,000 for policies issued or renewed on or after July 1, 2020 (Senate Bill 1087 of 2019 raised the limits from 15/30/10).

A.R.S. § 28-4009; Arizona Department of Transportation — Mandatory insurance

Contractor licensing

Contractors must hold a Registrar of Contractors license; the license takes effect only once a surety bond sized to the classification and annual volume is filed, residential licensees also pay into the Residential Contractors' Recovery Fund, and applicants with employees must provide a certificate of workers' compensation insurance.

A.R.S. § 32-1152; Arizona Registrar of Contractors — Bond information

Workers' compensation in Arizona

Arizona counts coverage from the first hire. There is no headcount threshold and no part-time exception, so a café that adds one weekend employee is an insured employer that day. Casual labor is excluded only when the work is both casual and outside the employer's usual business. Owners who hold half or more of the business are outside the system unless they elect in; smaller owners are employees. The Industrial Commission investigates uninsured employers and can assess penalties and close a business by injunction.

Auto liability in Arizona

Senate Bill 1087 raised the state minimum to 25/50/15 for policies issued or renewed from July 1, 2020, the first increase since 1972. Commercial policies written for Arizona businesses typically carry a $1M combined single limit, which is what leases, platform agreements and construction contracts demand.

Contractors in Arizona

The Registrar of Contractors licenses the trades. A license is not active until the surety bond is filed, and the bond amount scales with classification and expected volume; residential contractors also fund the Recovery Fund. Applicants with employees attach a workers' compensation certificate, and renewals need a current one. The bond is not insurance for the contractor: general liability and auto remain separate policies that customers ask to see.

How CoverMatch uses these rules

An Arizona business in the wallet is checked against these rules: workers' compensation as soon as an employee is reported, auto limits on every scheduled vehicle, and the bond and workers' compensation evidence for licensed trades. Each rule links to its source, and a licensed agent reviews this page before it publishes and whenever the rules change.

Sources

Questions people actually ask

Does an Arizona LLC with only its two members need workers' compensation?

Not for the members themselves while there are no other employees; members and officers can also reject coverage in writing once a policy exists. The moment a non-owner is hired, even part-time, coverage is required.

Do Arizona's 25/50/15 limits apply to a work truck?

They are the floor for any registered vehicle. Business vehicles are usually written at a combined single limit, commonly $1M, because general contractors, landlords and platforms ask for it in contracts.

Is a contractor bond the same as liability insurance?

No. The Registrar bond protects customers and the Recovery Fund; it pays nothing for your own injuries or property. General liability is separate and is what owners and general contractors ask to see on a certificate.

By business type in Arizona