Scottsdale & the Phoenix Valley
In Arizona, one employee is the threshold
Most owners believe workers' compensation starts at three employees, or five. Arizona has no such number. If you regularly employ one person — part-time, a relative, a teenager over the summer — you are required to carry it.
That is the most common gap we find, and it is rarely the only one. Sullivan James is an independent agency in Scottsdale, comparing more than thirty carriers.
Have my business reviewedThe rule people get wrong
There is no employee threshold
Arizona's Workers' Compensation Act reaches every person who employs any workers regularly employed in the same business under a contract of hire — that is the language of A.R.S. §23-902(A). There is no minimum headcount written into it.
The Industrial Commission of Arizona puts it plainly in its own guidance: coverage is required regardless of the number of workers, and that includes part-time staff, minors, and family members on the payroll.
Plenty of Valley businesses have operated for years believing they were too small to need it. They were not, and an uninsured claim is a very expensive way to find out.
A BOP is a foundation, not a finish
A business owner's policy bundles general liability and commercial property into one contract, usually at better value than buying them apart. It is the right starting point for most small businesses.
What it does not include: workers' compensation, commercial auto, cyber, or professional liability. For most businesses at least one of those four is the exposure that would actually do damage — which is why “I have a BOP” and “I'm covered” are not the same sentence.
What a business carries
Six coverages, and what each one answers
General liability
Third-party bodily injury and property damage arising from your operations. The coverage your customers and landlords ask you to prove before you can work.
Commercial property
Your building, contents, stock, tools and equipment. Frequently bundled with general liability into a business owner's policy.
Workers' compensation
Required in Arizona from your first regularly employed worker. Not part of a BOP, and the one people most often assume they are too small to need.
Commercial auto
Vehicles used in the business, including hired and non-owned exposure when staff drive their own cars on company errands.
Professional liability
For advice, design and services — an error, an omission, a deadline missed. General liability does not respond to a professional mistake.
Cyber liability
If you take card payments or hold customer data, a breach brings notification costs, forensics, ransomware and privacy claims. A general liability policy does not touch any of it.
Contractors
The bond and the insurance are different things
The Registrar of Contractors requires a licence bond or an approved cash deposit before a licence is issued, and it has to stay in force or the licence cannot be renewed — A.R.S. §32-1152(A). The amount is set by your licence classification and your anticipated annual volume of work, so it moves as the business grows.
Residential contractors carry a second obligation on top of that: either an assessment into the Residential Recovery Fund, or a separate bond of $200,000.
And the distinction that costs people money: a bond is not insurance. A bond guarantees your performance to your customer and to the state. Insurance pays for a covered loss to you. A bonded contractor with no general liability is exposed, and an insured contractor with no bond cannot hold a licence. Most contractors need both, and plenty carry only one.
Questions
What Valley business owners ask
Does a small business in Arizona really need workers' compensation with only one employee?
Yes. Arizona sets no employee threshold. Under A.R.S. section 23-902(A) the Act reaches every person who employs any workers regularly employed in the same business under a contract of hire, and the Industrial Commission of Arizona states coverage is required regardless of the number of workers — including part-time employees, minors, and family members. If you have one regularly employed worker, you are required to carry it.
What is a BOP, and is it enough on its own?
A business owner's policy bundles general liability with commercial property into one contract, usually at better value than buying them separately. It is a sound foundation and it is rarely the whole answer. A BOP does not include workers' compensation, commercial auto, cyber, or professional liability — and for most businesses at least one of those is the exposure that would actually hurt.
I'm a contractor. What does the Registrar of Contractors require?
A licence bond or an approved cash deposit, under A.R.S. section 32-1152(A). It has to be in place before a licence is issued and it has to stay in force or the licence cannot be renewed. The amount is set by your licence classification and your anticipated annual volume of work. Residential contractors have a further obligation: either an assessment into the Residential Recovery Fund or a separate bond of $200,000.
Is a bond the same thing as insurance?
No, and confusing the two is common. A bond is a financial guarantee that protects your customer or the state if you fail to perform or comply. Insurance protects your business against a covered loss. A bonded contractor with no general liability is exposed, and an insured contractor with no bond cannot hold a licence. They do different jobs and most contractors need both.
Do my business vehicles need commercial auto, or is my personal policy fine?
If the vehicle is used for business, a personal auto policy may exclude the loss precisely when you need it. Arizona's financial responsibility law applies to any vehicle on the highway, and the same 25/50/15 minimums apply — but minimums are not the issue. The issue is whether the policy responds at all once the vehicle is in business use. Heavier vehicles face far higher requirements: motor carriers over 20,000 pounds declared gross weight are commonly looking at $300,000 or $750,000 combined single limit under A.R.S. sections 28-4032 and 28-4033.
Why does everyone keep asking me for a certificate of insurance?
Because your customers, landlords and general contractors want proof you carry coverage before they let you on site or sign with you. Certificates are routine, they are needed constantly, and how quickly you get one is a genuine measure of whether your agency is any good. Slow certificates cost people work.
What's the difference between you and a State Farm or Allstate agent?
A captive agent represents one company and quotes that company's product. Sullivan James is independent and compares across more than thirty carriers. On commercial that matters more than it does on personal lines, because carrier appetite for a given trade varies enormously — the company that wants a restaurant often does not want a roofer.
More on the full range of commercial coverage we place. Renting property to guests? Short-term rentals are a business too.
Send what you have. We'll tell you what's missing.
Your current declarations pages, and within 48 hours you hear where the gaps are and whether your carrier is still competitive for your trade. Free, and no obligation to move anything.
Request your coverage auditOr call (480) 382-7332 — commercial is usually a conversation rather than a form.
General information about Arizona insurance and licensing requirements, not legal advice. Requirements depend on your specific business, trade, payroll and vehicles. Statutes referenced are A.R.S. §§ 23-902, 23-961, 32-1152, 28-4135, 28-4032 and 28-4033, available at azleg.gov; workers' compensation guidance is published by the Industrial Commission of Arizona at azica.gov and contractor bonding requirements by the Registrar of Contractors at roc.az.gov. Sullivan James is an independent insurance agency licensed in Arizona, not an insurance company.