Business Liability Insurance In Arizona: How Much Coverage Does Your AZ Business Need?

Business Liability Insurance In Arizona: How Much Coverage Does Your AZ Business Need?

By In Uncategorized On April 22, 2020


If you’re a business owner in the Grand Canyon State, this guide will explain how you can protect your business from legal claims and settlements. If you have a small 2-person company or you’re the head of a large enterprise, commercial liability insurance is required for success because it protects you regardless of the outcome of the legal case. 

Liability insurance can be purchased for small businesses all over the state of Arizona and it’s possible to find affordable plans with low deductibles. Arizona is a business-friendly state, surpassing the national average for economic growth. Each year, the state adds record jobs while small businesses account for the bulk of the state’s economy. Where there’s business, there are inevitably accidents and lawsuits.

Registering a company as an LLC (Limited Liability Company) will not make you immune to liability and you may be held personally liable. Business liability insurance AZ will insure your longevity in business and secure your employee’s jobs. Business owners who run businesses such as stores, franchises, warehouses, manufacturing plants, contract-based businesses, etc, need liability insurance that will protect them from legal prosecution and prevent bankruptcy.

Small Business Insurance Arizona: Benefits

Insurance for small businesses can protect your business from bankruptcy and ensure your business is functioning at full capacity. If you’re faced with a lawsuit, you’ll have to pay for legal defense fees which ultimately results in financial loss no matter the outcome of the case. 

Legal battles can hinder your ability to perform in business, causing financial loss and harm to your jobs and productivity. This is why you need the full protection mechanisms that a liability coverage policy can provide. The following are the main benefits of commercial liability insurance:

  • Legal Defense. You’ll have to be prepared to deal with multiple lawsuits a year. The costs to draft up your legal defense case, file the documents and prepare your case in court can amount to tens of thousands of dollars. 
  • Medical Protection. If a person injures themselves at the premise of your business establishment or one of your employees cause injury to a person (such as a traffic accident), you may be held legally liable. The insurance compensates them for their medical costs.
  • Intellectual Property. If you infringe on the copyrights or intellectual property of other businesses, you could be personally held liable. Many times an employee steals a design or a product from another business without your knowledge, and this can lead to a legal battle.
  • Physical Damage. If you damage a person’s property or an employee makes a mistake, you’ll have to cover the repair costs. If a client entrusts you with a device and an employee damages the device you’ll need insurance to cover the repair cost. Similarly, if an employee damages public or private property on the job site you’ll need the insurance to cover the repair cost.
  • Advertising Damage. If you employ slanderous advertising that causes competitors to lose revenue, they could take you to court.

Is Liability Legally Required In AZ?

The short answer: No. Liability insurance is not mandatory under Arizona state law. Employers must only prove worker’s compensation insurance for employees. This is a form of basic social security that covers employees in the event they get sick and need medical treatment or they can’t attend to their job due to an illness. 

Nonetheless, virtually all small businesses in AZ have some form of liability insurance. If you buy business insurance, the insurance will likely contain liability insurance. If you want to raise the limits on your liability insurance, one of the best ways to do that is to purchase general liability insurance.

  • AZ Business Vehicle Insurance

Commercial vehicle liability is mandatory under Arizona law and each one of your business vehicles has to be covered. If you have vehicles such as vans, trucks, cars, motorcycles, etc, that you use for company purposes like delivery or transport – you will need to purchase commercial liability for your fleet. 

While a standard liability plan will you for traffic accidents, it’s better to purchase automotive insurance that gives you higher coverage (especially if you own a fleet of vehicles). The state of Arizona requires a minimum of $30,000 bodily injury liability per accident and $10,000 in damages which means your basic automotive plan has to exceed $40,000 in coverage. Consider whether you want a commercial liability policy or a commercial automobile liability policy.

Business Liability Insurance AZ: How Much Is Necessary?

Every business situation is unique, and you need to estimate the total coverage necessary based on the requirements of your business. How do you know if you should take out $1M, $5M or $10M in coverage? The type of industry, product, marketing strategy, and business nature should determine the coverage you need. 

  • Business liability insurance AZ policies may have a total limit and a limit per lawsuit. If you own a construction company, you may be entitled to $5M in total coverage with $1M in coverage per lawsuit.

If you own a restaurant where a lot of people coming every day, you’ll need a higher volume than a small business that has few clients coming it. Likewise, if you own a large construction company you’ll need higher liability due to damages that could be caused to buildings, public infrastructure or bodily injury. 

How Much Does Business Liability Insurance Arizona Cost?

There are significant differences in the amount of coverage for business liability insurance in Arizona can cost. This varies based on the gross profits and the nature of the business. 

  • Factors that the insurance company will take into account include: Square footage of the business premise, yearly gross profits, # of employees and owners, business partners and industry. 
  • Each one of those factors could impact the price by $1000 if it’s a business with over 20 employees.

Small business insurance Arizona can cost as little as $400 per year, while larger companies with 25-50 employees may pay up to $5000 for their liability policy. Each insurance company uses a classification system to estimate the total cost you’ll have to pay. This is why you must contact potential insurers to get quotes based on the size of the business. 

Aside from the nature of the business, the factor that influences how much you’ll pay is your past claims history and experience in business. If you’re an experienced company with few lawsuits on your track record, you can expect to pay lower premiums than companies with a long claims history.

Customize Your AZ Liability Insurance Plan

Insurance companies allow you to customize the coverage you need. If your current coverage is for $1M but you want to increase that to $5M, you should be able to customize your plan. The past claims history will also affect the premiums you have to pay on an annual basis.

Pro Tip: Commercial plans are not the same. If you have a business partner that makes a similar profit, they likely have different commercial liability coverage. This is due to the fact that insurance policies, limits, deductibles, and personal finances vary based on insurer.


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