Arizona Car Insurance Laws: Minimum Coverage, Penalties and SR-22

For policies issued or renewed on or after July 1, 2020, minimum liability limits are $25,000 for bodily injury or death of one person, $50,000 for bodily injury or death of two or more people in one accident, and $15,000 for property damage (25/50/15). A vehicle driven on Arizona highways must be covered by such a policy, a certificate of self-insurance, or an alternate method of proof — a certificate from the State Treasurer showing a deposit of $40,000 in cash or certificates of deposit. (Holders of a self-insurance certificate are subject to the older 15/30/10 limits.)

Arizona follows the at-fault (tort) system for auto accidents: the Arizona statutes reviewed require liability coverage for damages "imposed by law" on the insured and do not require personal injury protection or impose a no-fault threshold. The Alabama Department of Insurance's national list of state auto insurance systems lists Arizona among the "Tort States."

Uninsured (UM) and underinsured (UIM) motorist coverage are optional in Arizona, but every insurer writing auto liability policies must offer both by written notice, on a form approved by the Director of Insurance, with limits not less than the policy's bodily injury liability limits, and must include them if the named insured asks. The declarations page sent to the named insured is the final record of the decision to buy or reject the coverage. A new offer is not required when a lapsed policy is reinstated or an existing policy is transferred, modified or renewed. For a hit-and-run with no physical contact, the insured must provide corroboration that the unidentified vehicle caused the accident.

A driver must have evidence of current financial responsibility for the vehicle inside the vehicle, and may display it on a wireless communication device (doing so does not consent to law enforcement looking at other contents of the device). Failing to produce evidence of insurance when an officer asks during a crash investigation or traffic stop is a civil traffic violation; the citation is dismissed if the driver later shows the court that the required coverage was in effect at the time.

Driving without required insurance is a civil violation. First violation: minimum civil penalty of $500 and a three-month driver license suspension (or restricted driving privileges, after MVD verifies current insurance). Second violation within 36 months: minimum $750 and a six-month suspension of the driver license and the vehicle's registration and plates. Third or later violation within 36 months: minimum $1,000 and a one-year suspension of license, registration and plates, with proof of financial responsibility (SR-22) required to reinstate. After a suspension ends, the license stays suspended until the driver files proof of financial responsibility and pays a $10 fee, and the registration and plates stay suspended until proof is filed and a $25 fee is paid. A court may reduce or waive the penalty for a driver with no violation in the past 24 months (or no more than one in 36 months) who buys a six-month policy.

Proof of future financial responsibility (an insurer's certificate, commonly called an SR-22, or a State Treasurer certificate for a $40,000 cash or certificate-of-deposit deposit) is required to reinstate a license, registration and plates after a suspension for driving uninsured. MVD may waive the proof requirement any time after three years from the date proof was required, or on the person's death or permanent incapacity, or if the person surrenders license and registration (in which case proof must be re-established for the rest of the three years if the person applies again). An insurer that has certified a policy cannot cancel it until at least 10 days after filing a cancellation notice with MVD.

After a private passenger auto policy has been in effect 60 days (or immediately for a renewal), the insurer may cancel only for: nonpayment of premium; fraudulent misrepresentation in obtaining the policy; license suspension or revocation during the policy period of the named insured, a household driver or a regular driver; certain permanent disabilities without a medical certificate; certain convictions within 36 months (vehicular homicide or assault, DUI, leaving the scene, false license application, reckless driving); insurer insolvency proceedings; regular commercial or ride-share use without coverage; or a Director finding. A cancellation or reduction in coverage for reasons other than nonpayment requires at least 10 days' notice, and nonrenewal for reasons other than nonpayment requires at least 45 days' notice. The notice must state the specific reasons, the insured's right to complain to the Director within 10 days, and possible eligibility for the assigned-risk plan. Insurers may not cancel or refuse to renew solely because of residence location, age, race, color, religion, sex, national origin or ancestry.

Arizona allows credit-based insurance scores but limits them: an insurer may not calculate a score using the absence of credit history (unless actuarially justified or treated as neutral), medical collection accounts, bankruptcies or lien satisfactions more than seven years old, the type of credit card used (unless actuarially justified), or total available credit; and may not use a score calculated using income, gender, address, ZIP code, ethnic group, religion, marital status or nationality. Insurers may still use ZIP code, address, gender and marital status for underwriting. An adverse decision based on credit information must identify the consumer report source and up to four primary factors. Separately, an insurer may not cancel or refuse to renew solely because of residence location, age, race, color, religion, sex, national origin or ancestry.

Arizona does not set a percentage threshold: a "salvage vehicle" is one that has been stolen, wrecked, destroyed, flood or water damaged or otherwise damaged to the extent the owner, leasing company, financial institution or insurer considers it uneconomical to repair. When an insurer acquires a vehicle in a total loss settlement, it must apply for a salvage, stolen-vehicle or nonrepairable certificate of title within 30 days after the title is assigned to it. An owner who keeps a salvage or nonrepairable vehicle must obtain the branded title before receiving the total loss settlement. A nonrepairable title cancels the vehicle's registration.

When a registered vehicle is sold, the seller endorses the assignment on the title (or title transfer form) and delivers it to the buyer with the vehicle, and must transfer the plates, surrender them, or file an affidavit of plate destruction within 30 days. The buyer must apply for title and registration within 15 days after the transfer, presenting the title or transfer form and the required fee; an odometer disclosure is also required for most vehicles. When ownership passes other than by voluntary transfer (for example, by inheritance), the new owner must obtain a new title, with the last title and documents showing authority, within 30 days. Arizona titles may include a transfer-on-death provision.

Complaints go to the Arizona Department of Insurance and Financial Institutions (Director of Insurance). A policyholder who believes a cancellation or nonrenewal is arbitrary or unlawful, or that the required notice or reasons were not given, may file a written objection with the Director within 10 days after receiving the notice; the Director must decide within 15 days of receiving it.