Workers’ Compensation Insurance in Arizona
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Arizona workers’ compensation insurance

Workers' compensation insurance protects business owners from the high costs of work-related injuries. In Arizona, all businesses with employees must carry this coverage.

Who needs workers’ comp insurance in Arizona?

Every Arizona business, from Tempe to Phoenix, that regularly hires or employs at least one employee is required to carry workers’ compensation insurance. All employees, full-time 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 and independent contractors 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.

Even when you're exempt, it can be a smart business decision to buy workers' comp. A job-related accident can result in costly medical expenses that could devastate a small business.

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.

How much does workers' compensation insurance cost in Arizona?

A small business owner calculating their workers' comp insurance payments

The average cost of workers’ compensation in Arizona is $46 per month.

Your workers' comp premium is calculated based on a few factors, including:

  • Payroll
  • Location
  • Number of employees
  • Industry and risk factors
  • Coverage limits
  • Claims history

How do occupational risks affect the cost of workers' comp?

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 their specific job is.

Your premium is based on the class codes of each of your employees. For example, a landscaper has a higher rate than an office worker because that job is inherently more dangerous.

How do you buy workers' compensation insurance in Arizona?

There are three ways to buy a workers' comp policy in Arizona:

  • You can buy it from a private insurance carrier. With Insureon, you can submit one free application to compare quotes from top-rated insurers.
  • You can buy it from the state fund. Arizona has a competitive state fund for workers' compensation: CopperPoint Mutual Insurance Company.
  • You can self-insure your business. Employers who meet certain requirements, including an annual payroll of at least $2 million, can apply to the Industrial Commission of Arizona for self-insurance.

How can Arizona business owners save money on workers' comp?

To save money on workers' comp insurance, it's important to make sure you classify your employees correctly. Employees with desk jobs or other jobs with a low risk of injury cost less to insure. This also helps you avoid misclassification fines.

In some cases, small business owners can choose to buy pay-as-you-go workers' compensation. This type of workers' comp policy has a low upfront premium, and lets you make payments based on your actual payroll instead of estimated payroll. It's useful for businesses that hire seasonal help or have fluctuating numbers of employees.

Finally, a documented safety program can help lower workers' comp costs. A safer workplace means fewer accidents, which helps keep your premium low.

How does a workers' comp claim work in Arizona?

Workers' compensation covers the cost of medical treatment for work-related injuries and occupational illnesses. Injured workers receive two-thirds of their regular monthly wage during recovery.

Other workers' comp benefits include permanent compensation or vocational rehabilitation for serious injuries that impact a worker's ability to perform their job, and death benefits for workplace fatalities.

Policies typically include employer's liability insurance, which helps pay a business's legal expenses if an employee blames their injury on the employer's negligence and files a lawsuit.

Under Arizona law, claims are based on a no-fault system. Workers receive medical benefits and compensation regardless of the cause of a job-related accident, if eligibility conditions are met.

Filing a claim must be done within a specific time frame. Employers must submit an Employer's Report of Injury form within 10 days of receiving notice about an accident. Injured workers must submit a Worker's Report and Physician's Report of Injury form within a year of when the injury occurred to receive workers' comp benefits (the doctor's office typically submits these forms).

Arizona has a workers' compensation fee schedule, updated annually, that sets what healthcare providers get paid for providing different types of medical treatment.

Once an employee accepts workers' compensation benefits, they give up the right to sue their employer. This provision is called the exclusive remedy.

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's Special Fund Division 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.

Visit ICA online at for more info.

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Workers’ compensation death benefits in Arizona

If a worker dies on the job, their 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.

Workers’ comp benefits 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

Injured workers have one year from the date of injury to file a claim. Workers have a responsibility to notify the employer as soon as possible when an injury has occurred. Once the employer's insurance company has received the claim notice, it has 21 days to accept or deny it.

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

The ICA's Claims Division does not provide legal advice, so you may want to contact a workers' compensation attorney for disputes about claims or settlements.

Get free workers’ comp quotes with Insureon

If you are ready to explore workers’ compensation coverage options for your Arizona business, start a free online application today to compare quotes from top-rated insurers. Our licensed agents in Arizona are available to help you find the best policy to protect your business.

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Updated: February 6, 2024

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