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Texas Workers' Compensation Insurance

Texas is the only state in the country that does not require employers to carry workers’ compensation insurance.

Work comp insurance covers wage replacement and medical bills for employees injured on the job, and limits an employer’s liability if an employee sues for damages.

Read on for more on the Texas workers’ compensation system. To protect against other injuries at your place of business, you may need general liability insurance.

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Small Business Work Comp Requirements in Texas

Texas is unique in that employers are not required to carry workers’ compensation insurance. Limited exceptions to this rule may include:

  • Companies that enter into a building or construction contract with a government entity.
  • Public or educational employers.
  • Independent contractors may not be covered by the hiring company’s insurance policy and may need to provide proof of work comp.

Texas employers who do not carry workers’ compensation insurance coverage are required to report their non-coverage status and must still report any work-related injuries and occupational diseases to the Texas Department of Insurance, Division of Workers’ Compensation.

Employers must also notify their employees that they do not provide work comp insurance. Employers can receive fines from the state for not complying with annual reporting requirements.

Employers that opt-out of the state workers’ compensation system are called non-subscribers. Non-subscribers are not penalized by the state for not carrying coverage, but can be at risk for greater liability if a worker is injured.

Workers’ compensation insurance limits the employer’s liability for work-related injuries, and opting into workers’ compensation legally limits the amount and type of compensation that an injured employee may receive. Non-subscribers are exposed to nearly unlimited damages and legal fees, if a worker brings a personal injury lawsuit against the company.

In 2016, an estimated 78% of employers did subscribe to the state’s workers’ compensation plan. Of non-subscribers, about 23% chose to provide an alternative occupational benefit plan to employees.

How to Buy Small Business Workers’ Compensation Insurance

Texas has a private market. You can purchase a workers' compensation policy from any private insurance carrier or agency that is licensed by the Texas Department of Insurance. Get started on a policy with WorkCompOne >>

Texas workers’ compensation rates are recommended by the National Council on Compensation Insurance (NCCI), which most states use as their rating bureau. NCCI collects data on workplace injuries and advises rates based on class code, or industry classification. Texas just moved to using NCCI in 2014.

Self-insuring or joining self-insuring groups are also options, typically for larger employers, as long as the self-insured parties meet state requires and are certified.

If you’re having trouble getting a workers’ compensation policy, contact Texas Mutual Insurance Company. Texas Mutual is the workers compensation insurer of last resort, and will provide coverage to higher-risk businesses.

Coverage and Rates in Texas

Small businesses must comply with the state where employees perform work, regardless of where the business was founded or is based. If your business operates in multiple states, or employees travel across state lines to work, you may need to modify your policy to guarantee coverage. Non-subscribers might still need coverage for out-of-state employees or work.

Texas workers’ compensation system reforms, including health care networks, advocacy and resources for safer workplaces, have focused on reducing costs and improving worker care. As a result, premiums have fallen by 63% since 2005, according to the Texas Department of Insurance – Division of Workers’ Compensation (TDI-DWC).

NCCI reports that the average premium for each $100 of payroll dropped from $2.32 in 2003 to $0.86 in 2015.

Fewer claims and injuries suggest that Texas workplaces are becoming safer, and lower rates have incentivized more employers to carry workers’ compensation insurance.

Meanwhile, critics of the opt-out system argue that by allowing employers to offer their own program for injured workers, larger companies in particular are able to get away with lower benefits and limited oversight.

In Texas, insurance companies that offer workers' compensation insurance are required to provide accident prevention services to policyholders at no additional charge. Contact your insurance carrier to see what services or programs they offer.

The Texas Department of Insurance also provides resources to help keep workplaces safe. The Occupational Safety and Health Consultation Program (OSHCON) helps employers understand and comply with OSHA requirements, and teaches them how to maintain safe workplaces.

Texas Work Comp Resources

Editor's note: Last updated on August 2, 2018

Here's What You Need to Get Started

To buy workers compensation insurance, you need to request a quote from a licensed insurance agent and provide some details about your business.

Here’s what to have in front of you:

  • Number of employees in each class code.
  • Total payroll for all employees. You may be able to exclude yourself if you don't wish to be covered under the policy. 
  • Federal ID Number. If you are a sole proprietor, you can use your Social Security Number.
  • Copy of your workers comp insurance policy, if you've had coverage or claims in the past few years. If you know your company's experience mod, please have your experience mod rating sheet or policy in front of you. Otherwise, you will be assigned a default rating of 1.0.

The information on this page has been interpreted and summarized for your convenience. Please consult your state's governing authority for the most current and complete legislation.