In Arizona – the “Grand Canyon state” – the Financial Responsibility law requires that everyone who drives must carry at least the required amount of liability auto insurance, which includes both bodily injury and property damage coverage. If you are a high-risk driver due to a record of accidents, DUIs or lack of driving experience, you may have trouble finding auto insurance on your own. To make sure that all motorists are covered on the road, the Arizona Automobile Insurance Plan (AZ AIP) was created.
It is costly to be a high-risk driver. Should you find coverage through the AZ AIP, you should focus on improving your driving record. With an improved driving record (no violations and no accidents!), you’ll be far more likely to qualify for insurance in the voluntary market – where insurers voluntarily take you on as a policyholder – and to receive a lower premium for your Arizona auto insurance.
What is the Arizona Automobile Insurance Plan?
The AZ AIP was formed in 1952 to ensure all eligible Indiana drivers have access to auto insurance coverage regardless of their risk as a driver. The AZ AIP doesn’t write insurance policies itself, but is an entity that assigns high-risk drivers to existing, licensed Arizona auto insurers. All auto insurers who want to do business in Arizona must participate in the plan.
Auto insurers spend big bucks to hone their underwriting criteria to help them identify drivers who are less likely to file claims than others. Those who do not fall within each company’s preferred risk pool are likely to be rejected. However, each insurer must accept a share of assigned drivers by the AZ AIP that is proportional to the company’s share of the total auto insurance market in Arizona. For consumers, this means that you cannot actually select your insurer when you are seeking insurance through this plan.
Arizona Automobile Insurance Plan Eligibility
Except for a couple of specific reasons (below), all Arizonan motorists are eligible for AZ AIP. Nevertheless, Arizona is one of many states that insist that you first look for insurance on your own before turning to the AZ AIP. On your AZ AIP application, you must certify that you’ve been declined by at least one insurance company.
You can apply for AIP coverage as long as you have a valid driver’s license. However, even your assigned insurer can turn you down for the following reasons:
- You have an outstanding premium payment due to an auto insurance company
- Your auto insurance policy has been cancelled within the last 12 months for failure to present your vehicle for inspection by an auto insurance representative
- If your car is an antique (older than 25 years) or has an actual cash value of more than $25,000, the AZ AIP can refuse to cover you for physical damage insurance
Generally speaking, if you address these problems then you can re-apply to the AZ AIP right away. Pay the premium or get your car inspected by the authorized individual. However, if in reviewing your application the AZ AIP determines that you have provided false information, you may have to wait 12 months before you can apply again. The AZ AIP requires all drivers to apply in good faith, and driving uninsured in Arizona can have serious penalties.
Arizona AIutomobile Insurance Plan Coverage
Arizona’s Financial Responsibility law mandates insurance coverage for all registered vehicles. Just like any regular policy, on AZ AIP policies you will find Arizona's mandatory coverages as well as a choice of optional coverages. There are also different levels of coverage amounts within these categories. The more coverage and amount you ask for, the higher your premium will be.
Once you are assigned an insurer through the AZ AIP, you are guaranteed three years of coverage, unless you ever lose your driving privilege or fail to pay your insurance premium on time during the three years. On the other hand, YOU can cancel your insurance if you find a suitable auto policy in the voluntary market. Note that if you cancel in the middle of the policy term, you will have to pay a surcharge of 10% of the remaining premium. And you will have to show written proof of your new policy to your assigned auto insurer before they let you terminate the policy.
At the end of the 3 years, ideally, you would have cleaned up your driving records and made yourself a safer driver to find car insurance on your own, at a lower rate. If you still have trouble finding coverage, you can re-apply to the AZ AIP. That means that you may or may not receive the same assigned insurer, but you will get coverage.
The table below shows the limits that are available to you for your mandatory coverages. Again, you MUST have Bodily Injury and Property Damage coverage at the minimum levels to be on the road at all.
|Mandatory Coverage||Arizona Required Min. Limits||Arizona AIP Max. Limits|
|Bodily Injury (BI)||$15,000 per person / $30,000 per accident||$100,000 per person / $300,000 per accident|
|Property Damage (PD)||$10,000 per accident||$50,000 / accident|
There are optional coverages also that deserve serious consideration. For example, Arizona attorneys will tell you that the number of uninsured motorists in the state runs about 20%. If that is a concern, consider adding Uninsured/Underinsured Motorists coverage. When you purchase any one of the two physical damage insurance coverage, there will be a deductible you need to pay out-of-pocket before coverage kicks in, and AZ AIP's deductible choices are $100, $200, and $250.
|Optional Coverage||AZ AIP Min. Limits/Deductible||ARIZONA AIP Max. Limits|
|Medical Payments (MED)||$2,000||$5,000|
|Uninsured/Underinsured Motorist (UM/UIM)||$15,000 per person / $30,000 per accident||Can be high as your Bodily Injury limits, but not higher|
|Collision||$100 deductible||Covers actual cash value of your car, up to $25,000|
|Comprehensive||$100 deductible||Covers actual cash value of your car, up to $25,000|
Arizona Automobile Insurance Plan Premiums and Payment Plans
There are no published statistics on whether your assigned insurer through the AZ AIP is charging you more or less than your less risky neighbors. Generally speaking, the higher risk you are – the likelihood of you filing an insurance claim – the costlier your Arizona insurance premiums will be. It pays to understand the factors that all insurance companies consider when offering and pricing your policy, so that you can take action to reduce your premium wherever possible.
There are basically two ways to pay you insurance premium to your assigned insurer: The first is to pay a 40% down payment with your application – which must be made in form of check when you sign up – and the remaining 60% within 30 days. The second way is an installment plan. Unique compared to other states, Arizona requires you to pay a deposit of 18.5% of the annual premium up front. The balance of the premium is paid in 11 monthly installments, with a service charge of $4 for each.
Be aware that if you fall behind on your payments, your assigned insurer will send you a Notice of Cancellation with a bill for the last installment plus the current installment plus the service charges for both. If you pay that amount before the due date of the current installment, you’ll be reinstated automatically.
How to Get Insurance through the Arizona Automobile Insurance Plan
You can ask any licensed Arizona agent to get you a quote for the AZ AIP. Generally speaking, when the agent realizes that the insurance companies have refused to offer you coverage, they will notify you and put your application through to the AZ AIP through the electronic application submission interface (EASi). You can find an example of the application here.
For more information about the AZ AIP, call the Arizona Department of insurance at 602-364-2499.