3.1 Arizona Auto Insurance Requirements

Mandatory Liability Limits (25/50/15)

Under A.R.S. 28-4009, every motor vehicle registered in Arizona must carry a liability policy meeting the state minimum, expressed in shorthand as 25/50/15. This is the single most-tested number on the casualty side of the Arizona Property & Casualty exam.

The limits were raised from the old 15/30/10 by Senate Bill 1087, signed in 2019 and effective July 1, 2020. Watch the exam trap: the increase happened in 2020, not 2025, and the property-damage floor moved from $10,000 to $15,000. Any answer showing 15/30/10 is the prior (obsolete) standard.

Proof of Financial Responsibility

Arizona is a financial-responsibility / compulsory-insurance state. Drivers must be able to show coverage:

• A physical or electronic insurance card (Arizona accepts mobile/electronic proof).
• The Motor Vehicle Division (MVD) electronically verifies coverage; insurers transmit policy data.
• A driver may instead post a certificate of deposit of $40,000 with the Director or a bond as alternative proof of financial responsibility.

Driving without insurance carries escalating penalties: a first offense generally brings a license, plate, and registration suspension of 3 months plus reinstatement fees; a second offense within 36 months is a 6-month suspension; a third is 1 year. The driver must then file an SR-22 certificate for a set period to reinstate.

Rating and Credit-Based Insurance Scores

Arizona allows auto rates to reflect risk-based factors but regulates the use of credit information under A.R.S. 20-2106:

• Permitted factors include driving record, years licensed, annual mileage, vehicle type/safety features, garaging territory, and a credit-based insurance score (subject to limits).
• An insurer may not use credit as the sole basis for declining, canceling, or non-renewing a policy.
• The absence of credit history alone cannot justify an adverse action; the insurer must treat the applicant as if neutral or use an alternative method.
• Consumers may request re-rating after a credit event (e.g., dispute resolution) and must receive an adverse-action notice when credit affects the rate.

Pure Comparative Negligence (A.R.S. 12-2505)

Arizona is a tort (at-fault) state: the negligent driver (and that driver's liability insurer) pays for the harm. To allocate damages when both drivers share blame, Arizona applies pure comparative negligence.

• Each party's fault is expressed as a percentage; recovery is reduced by the claimant's own percentage of fault.
• There is no bar to recovery — a plaintiff 99% at fault can still collect 1% of their damages.
• This contrasts with modified comparative states (50%/51% bars) and with old contributory negligence (any fault = no recovery).

Worked example. Driver A (70% at fault) has $40,000 in damages; Driver B (30% at fault) has $20,000.

• A recovers 30% of $40,000 = $12,000 from B.
• B recovers 70% of $20,000 = $14,000 from A.

UM/UIM: Must Offer, May Reject

Under A.R.S. 20-259.01, every auto liability policy must offer both:

Key rules an Arizona producer must know:

• The offer and any rejection must be in writing; if no signed election is on file, UM/UIM is presumed in an amount equal to the liability limits.
• An insured may select limits up to the policy's liability limits (not required to match exactly if lower limits are offered and chosen).
• A one-time written rejection carries forward to renewals and replacement policies of the same coverage — the insurer need not re-offer at each renewal.
• A new written offer is required when the policy is materially changed (e.g., added coverage) or a new policy is issued.

Optional First-Party Coverages

Because Arizona is a pure tort state, PIP is NOT required and there is no injury threshold to sue. Drivers commonly add optional coverages:

• Medical Payments (MedPay) — no-fault medical for the insured/passengers, optional.
• Collision and Comprehensive (Other-Than-Collision) — first-party physical damage, required by lenders, not the state.

How the limits respond in a claim

The split-limit structure means each figure is a separate cap. Suppose an at-fault driver carries the minimum 25/50/15 and injures three people, causing $20,000, $30,000, and $40,000 in bodily-injury claims plus $18,000 in vehicle damage:

• The $25,000 per-person cap reduces the $40,000 claim to $25,000.
• The $50,000 per-accident cap then limits the total bodily-injury payout to $50,000 across all three claimants.
• The $15,000 property-damage cap covers only $15,000 of the $18,000 vehicle loss.
• The remaining unpaid amounts become the at-fault driver's personal liability, which is exactly why agents recommend limits well above the state floor.

Exam tip: Distinguish 'must offer' (UM/UIM) from 'must carry' (25/50/15 liability). Liability is compulsory; UM/UIM is only an offer the insured can decline in writing; PIP is neither required nor mandated to be offered.