Arizona's Workers' Compensation Insurance Law

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Who needs workers’ comp insurance in Arizona?

Every Arizona business with employees is required to carry workers’ compensation insurance. All employees, full- or part-time, are required to be covered.

Some coverage exceptions include independent contractors, casual or occasional workers, and domestic workers who are only employed in a home.

Do you need workers’ compensation insurance in Arizona if you are self-employed?

Sole proprietors are not required to have Arizona workers’ compensation insurance coverage, though they could elect to carry coverage for themselves. However, if the sole proprietor of a business hires employees, those people must be covered.

Is workers’ comp required for Arizona subcontractors?

You’re not required to provide workers’ compensation insurance for independent contractors in Arizona. However, be sure that the worker qualifies as a contractor. Disputes sometimes arise over employee classifications, and a contractor could be considered an employee.

If a case gets to court, these factors will be considered to determine whether a worker is a contractor or an employee:

  • Duration of employment
  • Method of payment
  • Right to hire and fire
  • Extent of the employer’s control over how work is performed
  • Ownership or supply of tools and materials
  • How work hours are set
  • Whether work was performed in the regular course of business

Even if you think you’re hiring an independent contractor, look at the totality of the circumstances to make sure that you’re not required to provide workers’ compensation.

 

What are the penalties for not having workers’ comp insurance in Arizona?

The Industrial Commission of Arizona (ICA) regulates workers’ compensation insurance. If you fail to carry the correct insurance, there can be stiff penalties.

For one thing, an injured employee could sue you, which would likely result in far more expensive damages than the premium you would have paid for insurance.

If the employee files a claim with the ICA and isn’t covered with an active policy at your business, the ICA will pay the benefits. It would then charge you for reimbursement of those benefits paid plus a penalty of 10% of any benefits paid or $1,000, whichever is greater.

You can also be charged a separate penalty of $1,000 just for not having the correct insurance, and additional penalties of $5,000 and eventually $10,000.

 

What is the average cost of workers’ compensation insurance in Arizona?

The average cost of workers’ compensation in Arizona is $0.95 per $100 in wages.

Arizona uses the National Council on Compensation Insurance (NCCI) system to establish codes for various occupations. Each individual employee would be classified under the code, which is based on how hazardous his or her specific job is. For example, a landscaper has a higher rate than an office worker because that job is inherently more dangerous.

Your premium is based on the class codes of each of your employees.

 

Workers’ compensation death benefits in Arizona

If a worker dies on the job, his or her survivors might be eligible to receive workers’ comp death benefits. These benefits are available to a spouse, children, or other dependents who rely on the deceased person for financial support.

These survivors are eligible for death benefits:

  • Spouse
  • Child under 18 years old
  • Child under 22 years old who is a full-time student
  • A child of any age who is unable to be self-supporting

If there are no children or surviving spouse, parents or siblings who are under the age of 18 and who depend on the deceased worker for financial support could also qualify to receive death benefits.

The surviving beneficiaries can receive a combined 67% of the worker’s average monthly wage, up to a statutory maximum of $4,741 for injuries that happened in 2019.

Death benefits under workers’ compensation in Arizona also include up to $5,000 in burial expenses.

 

Workers’ comp settlements in Arizona

Until 2018, there were no settlements for workers’ compensation claims in Arizona.

The new law is for “full and final” settlements, which means parties may settle accepted claims with approval by the ICA. Those settlements must include projected future medical costs and a statement that the parties have reasonably tried to protect Medicare interests, which could include a Medicare savings account.

A workers’ compensation settlement benefits both the employer and the employee. The employee receives a lump sum payment or a structured settlement that is paid in installments over a set period of time. The employee also gives up the right to future benefits, which means that the employer will no longer be liable for legal expenses associated with that claim.

 

Workers’ compensation statute of limitations in Arizona

An injured employee has one year from the date of injury to file a claim. The worker has a responsibility to notify the employer as soon as possible when an injury has occurred. Once the carrier has received the claim notice, it has 21 days to accept or deny it.

If the insurance carrier denies the claim, the worker is required to request a hearing within 90 days of the date of the denial notice.

 

Compare free workers’ comp quotes with Insureon

If you are ready to explore workers’ comp insurance options for your Arizona business, start a free online application today to compare quotes from multiple carriers. Our licensed agents in Arizona are available to help you find the best policy to protect your business.

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Workers' compensation insurance: Further reading

See workers' comp laws where you live