In nearly every U.S. state, employers are required to carry workers’ compensation insurance. Since laws surrounding coverage are written at the state level, each state has different rules and requirements. Workers’ compensation is one of many small business insurance types all Texas entrepreneurs should consider.

In this article, we’ll explain workers’ compensation laws in Texas—who you need to cover, who is exempt, and possible penalties for non-compliance.


How does workers’ compensation insurance in Texas work?


Texas is one of the few states that doesn’t require employers to obtain workers’ compensation insurance for their employees. However, just because the laws give you a pass doesn’t mean you shouldn’t have insurance. In the event of a workplace injury or illness, employees can sue their employers for medical costs and lost wages if they’re uninsured. Having insurance limits the amount of liability you can be exposed to if a worker files a claim.

Most employers in Texas purchase workers’ compensation insurance through private insurers. Those private insurers must be licensed by the Texas Department of Insurance. Large corporations with sufficient capital resources can also qualify to become self-insurers.


Who needs workers’ compensation insurance in Texas?


Texas does not have a mandate requiring employers to purchase insurance for their employees. There are, however, exceptions to this rule.

Private companies who contract with government entities must have workers’ compensation insurance for their employees while working on said contract. The requirement also extends to any sub-contractors who may be on the job.

If you’re self-employed, you don’t have to purchase workers’ comp insurance for yourself. However, if you’re doing contract work for another business, that business may have to add you to their workers’ comp policy depending on the nature of your work. Additionally, executive officers and LLC members who have at least 10% ownership in a company aren’t required to be covered under a company’s workers’ comp policy.


What are the penalties for not having workers’ comp in Texas?


Since workers’ compensation insurance is not required in Texas, there are no penalties for having uninsured employees. As an employer, you could still be held responsible for covering your employees’ medical costs and lost wages after a work-related incident. So while forgoing coverage means you won’t face any fines, you’re still open to significant financial risk.


How much does workers’ comp insurance in Texas cost?


On average, employers in Texas pay $0.55 annually per $100 in covered wages.


What does workers’ comp cover?

Medical costs

If one of your employees is injured or becomes ill on the job, workers’ comp can cover their immediate medical expenses such as ambulance rides, emergency room visits, x-rays, surgery and prescription medications.

For example, if a kitchen employee reaches into a sink and slices their hand on a broken glass, they might require medical attention. Workers’ comp could cover the costs of their emergency room visit, stitches and pain management prescriptions.

Lost Wages

Many work-related incidents can leave employees unable to work for several weeks or months. Workers’ comp can provide some relief for employees in the form of partial wage replacement.

If an employee breaks their foot in a work-related accident, they could end up stuck at home for multiple months. While they’re out of work, workers’ comp would cover some of their lost wages.

Ongoing Care

Some work-related injuries require long-term care such as physical therapy or pain management. Often, these injuries are more the result of repetitive workplace stress rather than a single traumatic incident. Chronic back issues for construction workers and carpal tunnel syndrome for office employees are two common examples of the types of workers who might receive ongoing care due to repetitive stress. If their claim is approved, workers’ comp can cover the costs associated with their ongoing care.

Death Benefits

If the unthinkable happens and an employee passes away because of a workplace incident, workers’ comp can cover funeral costs and other death benefits for the deceased worker’s family or beneficiaries.