2.1 Arizona Homeowners Insurance Requirements
Key Takeaways
- Arizona does not mandate homeowners insurance, but mortgage lenders typically require it
- The Arizona FAIR Plan provides property insurance for high-risk properties that cannot obtain coverage in the voluntary market
- Arizona requires 45 days notice for non-renewal of homeowners policies (30 days for cancellation)
- Arizona has specific requirements for dwelling fire policies and disclosure of policy provisions
- Producers must disclose significant exclusions and limitations at time of sale
Arizona has specific property insurance regulations that producers must understand.
Homeowners Insurance Not Mandated
Unlike auto insurance, Arizona does not require homeowners insurance by law:
When Coverage Is Required
| Situation | Insurance Required? |
|---|---|
| Homeowner (no mortgage) | Not required |
| Homeowner (with mortgage) | Lender typically requires |
| HOA properties | May require coverage |
| Renters | Not required |
Note: While not legally required, virtually all mortgage lenders require homeowners insurance as a condition of the loan.
Arizona Homeowners Policy Forms
Arizona uses standard ISO homeowners forms:
Policy Forms
| Form | Coverage Type | Dwelling | Personal Property |
|---|---|---|---|
| HO-2 | Broad | Named perils | Named perils |
| HO-3 | Special | Open perils | Named perils |
| HO-5 | Comprehensive | Open perils | Open perils |
Dwelling Fire Policies
For properties that don't qualify for homeowners:
- DP-1 (Basic)
- DP-2 (Broad)
- DP-3 (Special)
Arizona FAIR Plan
The Arizona FAIR Plan provides coverage for high-risk properties:
FAIR Plan Overview
| Feature | Details |
|---|---|
| Purpose | Coverage for hard-to-place risks |
| Eligibility | Must be declined by voluntary market |
| Coverage | Fire and allied lines |
| Territory | All of Arizona |
| Administered By | Member insurance companies |
Eligibility Requirements
To qualify for the Arizona FAIR Plan:
- Property must be insurable
- Must demonstrate declination from voluntary market
- Property must meet minimum standards
- Applicant must have insurable interest
Cancellation and Non-Renewal Requirements
Arizona has strict requirements for canceling or non-renewing property insurance:
Cancellation Notice Requirements
| Reason for Cancellation | Notice Required |
|---|---|
| Non-payment of premium | 10 days |
| Fraud or misrepresentation | 30 days |
| Material change in risk | 30 days |
| Policy in effect less than 60 days | 30 days |
| Substantial increase in hazard | 30 days |
Non-Renewal Notice Requirements
| Timeframe | Requirement |
|---|---|
| Standard Non-Renewal | 45 days before expiration |
| Reason Required | Must provide reason upon request |
| Written Notice | Required |
Exam Tip: Arizona requires 45 days notice for non-renewal of homeowners policies, which is longer than some other states.
Arizona Consumer Protections
- Must provide specific reason for cancellation or non-renewal upon request
- Cannot cancel for filing one claim
- Right to appeal to DIFI
- Reinstatement requirements for payment lapses
Disclosure Requirements
Arizona requires disclosure of key policy provisions:
Required Disclosures
- Coverage limits and deductibles
- Major exclusions (flood, earthquake, etc.)
- Named storm or percentage deductibles if applicable
- Policy conditions and limitations
Flood Insurance
- Standard property policies exclude flood damage
- National Flood Insurance Program (NFIP) available
- Private flood insurance options expanding
- Producers should disclose flood exclusion and offer alternatives
How many days notice must an Arizona insurer provide for non-renewal of a homeowners policy?
What does the Arizona FAIR Plan provide coverage for?
How many days notice is required for cancellation of an Arizona homeowners policy due to non-payment?