Arizona Contractor Insurance Requirements: Workers’ Comp and Bonds

Short answer: Arizona has no employee-count threshold for workers’ compensation. Under ARS 23-902, every person who employs any worker regularly employed is an employer, so a single helper triggers coverage. A sole proprietor can waive their own coverage only through the two-signature waiver in ARS 23-961(N), signed together with the hiring business’s carrier. The Registrar of Contractors requires a bond and a workers’ comp attestation — not general liability insurance.

Arizona splits this subject across two agencies. Workers’ compensation belongs to the Industrial Commission of Arizona; the bond and license conditions come from the Registrar of Contractors. Neither is a tax authority — for tax that is the IRS and the Arizona Department of Revenue, whose contracting rules are on Arizona sales tax for contractors. Licensing thresholds are on Arizona contractor license requirements.

Does Arizona require workers’ compensation if you have one employee?

Yes, and this is where Arizona diverges from states that set a floor of three or five workers. ARS 23-902 defines employers subject to the chapter as the state, counties, cities, towns, municipal corporations and school districts, “and every person who employs any workers or operatives regularly employed in the same business or establishment under contract of hire, including covered employees pursuant to a professional employer agreement, except domestic servants.” There is no number anywhere in that sentence. The only carve-out it contains is for domestic servants, which is not a trade contractor’s crew.

“Regularly employed” is wide on purpose: it “includes all employments, whether continuous throughout the year, or for only a portion of the year, in the usual trade, business, profession or occupation of an employer.” Trade work is seasonal by nature; that does not make the help casual. A laborer brought on for six weeks of summer work in your usual trade is regularly employed.

ARS 23-961 then gives two lawful ways to secure that obligation, and no third: insure with a carrier authorized by the Director of the Department of Insurance and Financial Institutions, or furnish the Industrial Commission satisfactory proof of financial ability to pay compensation directly or through a commission-approved workers’ compensation pool. Self-insurance is not a paperwork route — the Commission may require a deposit or other security in an amount it fixes, and the statutory floor when it does is $100,000 for workers’ compensation liabilities. The statute also closes the side door: an employer violates the chapter if it secures its obligations “through a substitute for workers’ compensation that does not comply with this section.” Occupational accident products marketed to trades are not a swap for Arizona coverage.

Can an Arizona sole proprietor waive workers’ comp?

For themselves, yes — but the mechanism is unusual and many Arizona sole proprietors get it wrong. ARS 23-961(N) does not create a form you file with the state to declare yourself exempt. It creates a waiver that “the sole proprietor and the insurance carrier of the employer subject to this chapter for which the sole proprietor performs services sign and date.” Two signatures, one belonging to the carrier of the business hiring you. It is relationship-specific, not a status you hold in the abstract. The statutory form is plain: “I am a sole proprietor… I am performing work as an independent contractor for [employer name]. I am not the employee of [employer name] for workers’ compensation purposes.”

It exists because of the flip side in ARS 23-902: a business using a sole proprietor who has waived rights under section 23-961(N) “is not liable for workers’ compensation coverage or the payment of premiums for the sole proprietor.” The waiver is what a general contractor needs on file so their premium audit does not sweep you in as an uninsured worker.

Situation	What Arizona expects
Working alone, subbing for a licensed GC	The 23-961(N) waiver, signed by you and the GC’s carrier
Working alone, direct with homeowners	No waiver counterparty; no coverage required for yourself
One helper, any duration	Coverage required — no employee-count threshold
Waiver signed, then you hire	Coverage required for the helper; the waiver does not reach them

Does the waiver cover your own employees?

No, and the form itself says so: “I understand that if I have any employees working for me, I must maintain workers’ compensation insurance on them.”

That sentence is the whole trap. A sole proprietor holding waivers for three general contractors is still an uninsured employer the moment they put a helper on a job, because the waivers address only the proprietor’s own status. Cross from working alone to hiring and the answer changes that day.

Does the Arizona ROC require general liability insurance?

Not as a licensing condition, which surprises contractors arriving from states where a liability certificate is stapled to the application.

ARS 32-1122 sets out what the Registrar requires: a verified application and fee, a written examination, four years of practical or management trade experience with at least two within the last ten, a possible fingerprint and criminal records check, a bond, and “an attestation that the applicant has complied with the statutes and rules governing workers’ compensation insurance,” with the policy number or proof of self-insurance.

So workers’ compensation is a license condition in Arizona. General liability is not named. That does not make it optional in practice: general contractors will not add you to a job without a certificate, and an uninsured property damage claim comes out of your own money. The state is simply not enforcing it. The market is.

What bond does the Arizona ROC require, and is it insurance?

A bond is required, and it is not insurance.

ARS 32-1152 provides that “before granting an original contractor’s license, the registrar shall require of the applicant a surety bond in a form acceptable to the registrar or a cash deposit.” The amount is not a single figure. The Registrar fixes it from schedules “after giving due consideration to the volume of work and the classification contemplated by the applicant,” so a small residential specialty operator and a commercial general contractor post very different amounts. Get the current schedule from the ROC before you budget.

Who the bond protects depends on which side you are licensed for. Commercial: a licensee under the chapter, or a lessee, owner, or co-owner of nonresidential real property with a direct contract. Residential: persons furnishing labor, materials, or construction equipment, plus claimants under the Residential Contractors’ Recovery Fund.

A liability policy pays a claim and moves on; a surety bond pays the claimant and then comes after you for reimbursement. It is credit underwritten on your finances, not protection for you. If a client is slow to pay while a claim sits open, how to get clients to pay is worth reading.

Is a home warranty required in Arizona?

Not as a mandatory product. Arizona’s homeowner protection is statutory rather than commercial: the Residential Contractors’ Recovery Fund under ARS 32-1132, which compensates claimants harmed by a licensed residential contractor’s violation of building laws and is funded by assessments on residential contractors rather than by a policy the homeowner buys.

Eligibility is narrow on the claimant side: individual owner-occupants, LLCs where at least one member occupies or will occupy the property, revocable living trusts where all of the trustors occupy or intend to occupy it, planned community or unit owners’ associations where the builder has transferred control and the damage is to common elements, and lessees who contracted directly or indirectly with the contractor and occupy the property as a primary residence. Because the claimant must occupy or intend to occupy as a primary residence, rentals and flips sit outside it.

It is also capped. Under ARS 32-1132.01 the maximum individual award from the fund is $30,000, and an award may not exceed the claimant’s actual damages, with anything recovered from other sources deducted first. So the fund is a floor for small residential claims, not a warranty standing behind a whole build.

More usefully for you: claims must be against a residential contractor licensed under the chapter, who held a valid residential license when the contract was signed, the first payment was made, or work began. A homeowner who hires unlicensed has no fund to go to — worth saying out loud on the estimate.

What proof do you need to keep?

Every item above is evidenced by a document somebody will ask for later. The ROC wants your workers’ compensation policy number at licensure. General contractors want a current certificate and a signed waiver before you set foot on site. A premium audit reconstructs who worked for you and when; a bond claim reconstructs what you contracted for and were paid.

None of that is hard while the job is live; all of it is hard eighteen months later. Keel is an iOS app that keeps the underlying record on the device — no account, no bank connection, no cloud sync, and an App Store privacy label reading Data Not Collected. It makes invoice PDFs with your own numbering, logo, and a payment-link QR code; captures receipts read on-device with Apple Intelligence; logs mileage; and writes it all into an append-only, hash-chained ledger you export as one file per year or as an Accountant Pack. Free is $0 with unlimited invoices, receipts, and mileage; Keel Pro is a one-time $249.99 Lifetime purchase.

Keel does not sell insurance, issue bonds, or file with the Industrial Commission or the ROC. It is a record keeper. Since premiums are a deductible business cost, self-employed tax deductions is the other half of keeping those receipts.

Frequently asked questions

How many employees before workers’ comp is required in Arizona?

One. ARS 23-902 defines employers as including every person who employs any workers or operatives regularly employed, with no minimum count. “Regularly employed” covers work that is continuous through the year or only for part of it, as long as it is in your usual trade or business — so seasonal and short-term help in your own trade counts.

Am I exempt from Arizona workers’ comp as a sole proprietor?

Only through the specific waiver in ARS 23-961(N), and only for yourself. It is signed by you and by the insurance carrier of the business you are performing services for, so it exists per hiring relationship rather than as a standing exemption. It gives no cover at all once you hire someone; you must then carry coverage on your employees.

Does the Arizona ROC require general liability insurance for a license?

The licensing conditions in ARS 32-1122 name a bond, a workers’ compensation attestation with policy number or proof of self-insurance, an examination, and four years of trade experience. General liability is not among them. In practice most general contractors and commercial clients will require a certificate anyway before letting you on the job.

Is the Arizona contractor bond the same as insurance?

No. A surety bond pays a claimant and then seeks reimbursement from you, so it functions as credit underwritten on your finances rather than as protection for your business. ARS 32-1152 requires it, or a cash deposit, before an original license is granted, with the amount set by the Registrar from schedules based on classification and contemplated volume of work.

Can I use an occupational accident policy instead of Arizona workers’ comp?

No. ARS 23-961 allows only two routes: insuring with a carrier authorized by the Director of the Department of Insurance and Financial Institutions, or furnishing the Industrial Commission satisfactory proof of financial ability to pay directly or through an approved workers’ compensation pool. Where the Commission requires a deposit or other security from a self-insurer, the statutory floor is $100,000 for workers’ compensation liabilities. The statute states that an employer violates the chapter by securing its obligations through a substitute that does not comply with that section.

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This article is general information, not legal or tax advice. Rules change — confirm with the authority named above.