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Want to start a business in Arizona? You’re in a prime spot, since Arizona ranks number one in the country for entrepreneurial activity. After the thrill of deciding to follow your dream of striking out on your own, there are a few items to cross off your to-do list.
The state’s Corporations Division lists ten steps to starting a business in the state. We also suggest considering getting business insurance in addition to that list!
Still, it’s best to know all of your requirements before flipping on the “open” sign.
So today, we’ll cover Arizona business insurance for new (and existing!) entrepreneurs in the state.
Let’s get started.
The first thing you should know about rules and regulations in the state of Arizona is that the state prides itself on being easy for businesses, with streamlined regulations, simplified tax systems, and low business costs.
When you think of business insurance, even if it’s for the first time, it’s likely general liability insurance that comes to mind. This type of policy typically covers the broadest scenarios of the insurance policies we’ll review today. It’s also useful for a wide range of business types.
Before we get into what general liability insurance is generally used for, it’s helpful to know who usually needs it.
Since Arizona typically has fewer regulations than some other states, it isn’t surprising that having an insurance policy isn’t always an automatic requirement for all businesses. Instead, Arizona general liability insurance requirements are usually based on:
For example, a contractor who wants to get their license as an LLC doesn’t necessarily need to show the state they have general liability insurance. However, if that contractor will be working in Phoenix, they need to carry at least $1,000,000 in coverage to meet city rules. This is why it’s essential to review business insurance requirements at the state and local levels.
P.S. If you’re a contractor in Arizona, check out our guide to getting an Arizona contractor's license.
There are other types of businesses that typically need Arizona general liability insurance, too. Child care centers and some pest control workers must have at least $300,000 in coverage. The Arizona Commerce Authority has a handy tool to find information on forms and the requirements based on your occupation and location.
Now let’s stop to understand what Arizona general liability insurance may be able to cover. From a high level, this type of policy typically can cover:
Those terms can still feel a bit like “insurance-speak,” so here are some scenarios to bring these ideas to life:
While checking out the progress, the homeowner steps on a loose board, falls, and breaks a bone. Now they want the carpenter to help foot the medical bills.
Since the guest has medical bills and had to miss work for a few days, they want to sue to recoup the costs.
The client now has a bruised ego, a broken wall, and a demand that the instructor pay for the damage.
All of these scenarios demonstrate that no matter your job, accidents can happen. Considering the average customer injury or damage claim is $30,000, having a policy can save you from facing a seriously big bill. That’s why even if Arizona business insurance isn’t always required for your job, we still recommend it.
Having a general liability insurance policy also can help build trust with potential customers, potentially help secure funding, or help with getting approved to sign a commercial space lease.
The next stop on our exploration into Arizona business insurance is professional liability coverage. This type of policy typically can help cover legal defense costs and claims related to negligence, claimed negligence, copyright infringement, and more.
Arizona professional liability insurance requirements depend on what your occupation is. For example, a home inspector needs at least $200,000 in professional liability coverage, sometimes called “errors and omissions.”
Other types of jobs that usually benefit from professional liability insurance can include:
Wondering what “negligence” may look like in business? Here are a few scenarios where an Arizona professional liability insurance policy could potentially help offset claims or legal costs:
A financial planner gives a family advice on saving for their son’s college tuition, but later the family claims the advisor left out important details that caused them to lose thousands of dollars.
A life coach suggests that a significant lifestyle change may be needed for a client. However, after uprooting their family, the client is still unhappy. They then sue the life coach for persuading them to make a bad choice while they were vulnerable.
A personal trainer pushes a client a little too hard during a work-out session, and the client passes out from dehydration. Now the client wants to sue for negligence and the mental anguish they endured.
Before you dismiss the idea of professional liability insurance because you work thoughtfully and thoroughly, remember that you don’t have to actually do something wrong for someone to claim negligence. Regardless of the merits of the negligence claim, if you do end up in a dispute with a disgruntled client, it’s possible you could incur legal fees in responding to the dispute or worse, defending your case.
If you have employees in Arizona, you need workers comp insurance. While other insurance coverage has a lot of “it depends” attached to it, Arizona workers compensation insurance is cut and dried.
The state has a “no-fault” system, which means that employees are entitled to coverage for workplace accidents or injury, regardless of who caused the accident. The average workers comp claim is around $41,000, which means low-cost insurance premiums could potentially offset hefty medical bills.
We’ve covered the three main business insurance policies to consider, but your options don’t necessarily end there. Here are a few other types of coverage you may need:
Business personal property insurance: If you have equipment, tools, or other property in your business, you might want to protect it. Property insurance could protect your property from natural disasters, vandalism, and more.
As we mentioned earlier, you need Arizona workers compensation insurance if you have employees. This includes full-time and part-time employees. There are only a few cases when you usually don’t need Arizona workers comp, including:
When you hire independent contractors. The contractor will need to submit a form acknowledging that they aren’t an employee of your company and won’t be covered by workers comp.
If you employ domestic workers. Domestic workers are people who work in a private home, such as child care or housekeeping duties. In Arizona, workers comp coverage for these employees is optional.
If you’re a sole proprietor. One-person companies are off the hook for Arizona workers compensation insurance requirements. However, sole proprietors can opt into workers comp coverage if they want it.
If an employer fails to get required workers comp coverage, they may face fines, penalties, or felony charges. For more information on Arizona workers comp laws, check out the state’s FAQ page here.
Arizona business insurance comes in all shapes and sizes, which means costs vary. Your premium costs usually depend on:
While this variability, unfortunately, means we can’t give you an exact answer here, it does have its benefits. For one, personalized insurance means you’ll typically pay for only what you need. Coverage can start smaller and then grow along with your company.
For reference, general liability insurance quotes can start as low as $22.50 a month* at Simply Business. Additionally, you can generally deduct the cost of insurance premiums from your business tax filings. You’ll want to confirm with an accountant or lawyer on the specific deductions that may apply to your business, though.
If you want to find out exactly how much your Arizona business insurance will cost, answer a few questions here for free, personalized insurance quotes.
Guess what? You just learned the basics of Arizona business insurance! That wasn’t so bad, was it? So to recap:
General liability insurance has the broadest coverage, and your occupation and location typically determine whether you legally need it. Remember, we recommend considering it either way.
Arizona professional liability insurance is a must for some occupations, like home inspectors, and is recommended for anyone giving advice.
Arizona workers comp insurance laws dictate that anyone with employees must have coverage.
Now here are some tips to make finding and comparing Arizona business insurance easier.
Use this form from the Arizona Commerce Commission to get a business checklist, info, and rules for your specific industry and city.
Check the Arizona Business One Stop site here to find state, county, and city agencies that typically regulate your industry.
Consider what type of coverage you’d like to have now and which you may need in the future.
If you perform more than one type of service, be sure to check requirements for every job and business type.
Compare quote options across insurers to find a coverage level and price you can commit to.
Talk to business owners in your area about what types of insurance they have, but always confirm the requirements for yourself to be safe!
Download your Certificate of Insurance (COI) once you have a policy. This proves that you’re covered, and the COI may be needed to get licensed, rent office space, and more.
Getting business insurance is probably at the bottom of the list of things you’d like to do on a free afternoon. Just know that every minute and dollar you invest into Arizona business insurance now could reap your business rewards in the future. Whether it’s financial assistance in case of a lawsuit or proudly displaying your trustworthiness to potential customers, business insurance could pay off in the long run.
If you’re ready to get started, check out our free quote comparison tool to get custom quote options , plus a great sense of accomplishment.
*Monthly payment calculations (i) do not include initial premium down payment and (ii) may vary by state, insurance provider, and nature of your business. Averages based on January - December 2020 data of 10% of our total policies sold.
This content is intended to be used for informational purposes only. It is not intended to provide legal, tax, accounting, investment, or any other form of professional advice.
*Harborway Insurance policies are underwritten by Spinnaker Insurance Company and reinsured by Munich Re, an A+ (Superior) rated insurance carrier by AM Best. Harborway Insurance is a brand name of Harborway Insurance Agency, LLC, a licensed insurance producer in all 50 states and the District of Columbia. California license #6004217.