Workers Comp Insurance Requirements for Small Businesses in AZ
Workers Comp Insurance Requirements for Small Businesses in AZ
If you’re a small business owner in Arizona, one question you can’t afford to overlook is:
“Do I need workers comp insurance for my employees?”
The answer depends on several factors — including how many people you employ, the nature of your work, and how your business is structured. In this blog, we’ll break down the workers comp insurance requirements for small businesses in AZ, helping you stay compliant and protect your team.
Learn more about business insurance in Arizona
🔍 Is Workers Compensation Insurance Required in Arizona?
Yes — Arizona law requires that every business with at least one employee carry workers’ compensation insurance, regardless of whether the employee is full-time, part-time, temporary, or seasonal.
Even if you’re a small, family-run business with just one employee, you’re still required to carry coverage. There are only a few exceptions, which we’ll cover below.
👤 Who Is Exempt from Workers Comp Insurance in Arizona?
Arizona provides specific exemptions to the workers’ comp requirement. You may not need coverage for:
Sole proprietors or independent contractors
(unless you hire others to work for you)Members of an LLC or corporate officers who choose to opt out of coverage
(must file appropriate forms with the Industrial Commission of Arizona)Casual laborers not employed in the usual course of trade or business
Household or domestic workers
📝 Important: Misclassifying employees as independent contractors to avoid providing workers’ comp coverage can lead to hefty fines and lawsuits.
⚖️ What Happens If You Don’t Carry Workers Comp Insurance?
If your small business is required to carry workers’ comp and you don’t, you’re exposing yourself to serious risks:
Civil penalties starting at $1,000 for the first offense
Business closure orders from the Industrial Commission of Arizona
Personal liability for all medical bills and lost wages if an employee is injured
Potential lawsuits from injured employees, which workers comp would have shielded you from
Bottom line: skipping coverage is far more expensive than securing it.
Visit our Workers’ Compensation Insurance page for details and quotes
💡 What Does Workers Compensation Insurance Cover?
Workers’ comp provides critical benefits to your employees and legal protection to your business. It typically covers:
Medical bills from work-related injuries or illnesses
Lost wages due to time off work
Disability benefits
Vocational rehab
Death benefits to dependents in the case of a fatal accident
🧾 How to Get Workers Comp Insurance in Arizona
Arizona small businesses have three main options:
Private Insurance Carriers
Most common and flexible option
Policies vary, so shopping multiple quotes is key
Arizona State Fund : The state’s assigned risk pool for businesses struggling to get coverage elsewhere
Self-Insurance (for large businesses only)
Only available to companies with strong financials and administrative capabilities
✅ Why Work With a Local Workers Comp Insurance Agency
At Professional Insurance Strategies, we help Arizona business owners like you:
Understand your legal obligations
Get quotes from over 100 carriers to find the best fit
Ensure your business is fully compliant and protected
Identify any additional discounts or policy bundling opportunities
We’ve helped hundreds of small businesses across Phoenix, Glendale, Mesa, and the West Valley get affordable, customized coverage that meets Arizona’s requirements.
Need more than workers comp? Check out our commercial auto insurance options for small businesses
📅 Let’s Review Your Workers Comp Policy
Not sure if your current policy is compliant? Starting a new business and need guidance?
📞 Call us at 623-463-9000 or
📍 Visit us at www.proinsgroup.com to schedule a free policy review.
Contact our team for a free policy review