What insurance is required before hiring employees?

Required Business Insurance Before Hiring Employees in Arizona

Before hiring employees in Arizona, businesses must secure specific insurance coverage to comply with state requirements and protect both the company and its workforce.

Workers' Compensation Insurance

Arizona law mandates that most employers carry workers' compensation insurance once they hire their first employee. This insurance covers medical expenses and lost wages if an employee is injured or becomes ill due to work-related activities.

• Businesses can purchase workers' compensation insurance through private insurers or the Arizona State Compensation Fund.
• Failure to maintain coverage can result in penalties and stop-work orders from the Industrial Commission of Arizona.

Unemployment Insurance

Employers must register with the Arizona Department of Economic Security to pay unemployment insurance taxes. This is not an insurance policy you buy but a payroll tax that funds unemployment benefits for eligible former employees.

• Ensure proper payroll setup to withhold and remit unemployment taxes accurately.
• Maintain timely reporting and payment to avoid penalties.

Additional Insurance Considerations

While not legally required, consider the following insurance types to manage operational risks effectively:

• General Liability Insurance: Protects against third-party claims of injury or property damage.
• Commercial Auto Insurance: Required if employees use vehicles for business purposes.
• Employment Practices Liability Insurance (EPLI): Covers claims related to wrongful termination, discrimination, or harassment.

Operational Tips

• Verify insurance coverage before onboarding employees to ensure compliance.
• Keep detailed records of insurance policies and payments for audits and reporting.
• Automate payroll tax calculations to include unemployment insurance contributions accurately.
• Consult with a licensed insurance broker familiar with Arizona requirements to tailor coverage to your business needs.