Insurance Curator Texas is the only state that generally does not require private employers to carry workers compensation insurance. That freedom, however, comes with serious financial and legal risks. Whether you “subscribe” to the state system or operate as a “non-subscriber,” understanding how coverage works, what it costs, and when it is mandatory is essential for every Lone Star business owner.
Is Workers Compensation Required in Texas?
Mandatory for Some, Optional for Most
- Private employers: You may choose to buy coverage (become a subscriber) or go without (become a non-subscriber).
- Public employers: State agencies and most political subdivisions must maintain workers comp.
- Certain contractors: Companies on government projects, at public universities, or involved in building and construction often face contractual requirements to carry coverage.
Choosing to go without a policy can save premiums today, but a single workplace injury could exhaust your cash reserves tomorrow.
The Hidden Costs of Non-Subscription
Texas non-subscriber employers must:
- File an annual DWC-5 form listing payroll and injury data.
- Post notices advising employees that they are not covered by workers comp.
- Waive common-law defenses (contributory negligence, assumption of risk, co-worker negligence) if an employee sues.
Because juries can award unlimited damages, many non-subscribers still purchase Occupational Accident or an alternative employers liability policy—but those plans usually cap benefits, leaving the employer exposed.
What a Texas Workers Comp Policy Covers
A standard policy purchased through private insurers and regulated by the Division of Workers’ Compensation (DWC) and the Texas Department of Insurance (TDI) provides:
- Medical benefits: All reasonable and necessary treatment for a work-related injury or illness.
- Income benefits: Temporary income (TIBs), impairment income (IIBs), supplemental income (SIBs), or lifetime income (LIBs) based on wage loss or disability.
- Death and burial benefits: Financial support for dependents and funeral expenses.
- Employers liability: Protection if an employee sues for negligence outside of the workers comp system.
How Workers Comp Costs Are Calculated in Texas
Premiums hinge on three core factors:
- Classification code: Each type of work is assigned a risk code by the National Council on Compensation Insurance (NCCI).
- Payroll: Premium is priced per $100 of employee payroll.
- Experience modifier (EMR): Your claims history compared with peers. An EMR below 1.00 reduces premiums, while anything above inflates costs.
2024 Sample Rates by Industry
| Industry (NCCI Code) | Rate per $100 Payroll | Low Annual Premium (10 Employees) | High Annual Premium (50 Employees) |
|---|---|---|---|
| Clerical (8810) | $0.16 | $320 | $1,600 |
| Restaurant (9079) | $1.28 | $2,560 | $12,800 |
| Residential Carpentry (5645) | $7.04 | $14,080 | $70,400 |
| Trucking—Long Haul (7219) | $9.72 | $19,440 | $97,200 |
Estimates assume a neutral EMR of 1.00 and average wages of $40,000 per employee.
Average Premium Benchmarks
According to TDI data, Texas subscribers paid $0.55–$2.25 per $100 of payroll in 2023, depending on industry and claims history. That places Texas below the national average, largely due to its competitive private market.
Ways to Lower Your Texas Workers Comp Premium
- Implement a formal safety program to cut claim frequency.
- Monitor modified duty: Offer light-duty roles to injured employees to reduce lost-time benefits.
- Keep accurate payroll records: Misclassified employees often trigger higher rates.
- Shop the market: Carriers file individual rates with TDI, so quotes can vary 20–30%.
- Request an EMR review if you suspect errors in your loss data.
Pro tip: Many insurers bundle workers comp with general liability insurance for Texas businesses, unlocking additional discounts.
How to Purchase Coverage
- Private market: More than 200 carriers write workers comp in Texas.
- Texas Mutual Insurance Company: The state-created mutual insurer focuses on small and midsize employers.
- Texas FAIR Plan (Residual Market): Businesses rejected by two or more carriers can secure coverage through the Texas Workers’ Compensation Insurance Fund.
Most policies are sold through independent agents who can also quote commercial auto insurance in Texas or package your policy with best small business insurance in Texas.
Penalties for Failing to Carry Required Coverage
- Construction or government contractors without required coverage can face contract termination and fines.
- Failure to file the DWC-5 as a non-subscriber may result in administrative penalties up to $25,000.
- OSHA fines can multiply quickly if unsafe conditions lead to injury.
When an uncovered employee wins a negligence lawsuit, the employer typically pays:
- Medical expenses
- Lost wages
- Pain and suffering damages
- Legal fees on both sides
Those costs often dwarf the annual premium you hoped to avoid.
Special Situations
Independent Contractors and Subcontractors
Texas presumes that anyone working in the course and scope of your business is an employee unless you can prove otherwise. Many general contractors require subcontractors to provide a certificate of insurance naming them as an additional insured. Failure to secure that documentation may leave you footing the bill for their injuries.
Oil & Gas and Maritime Employees
Energy employers may also need to comply with the Federal Longshore and Harbor Workers' Compensation Act (LHWCA) or the Jones Act for offshore crews. Specialized endorsements or separate policies are required.
Frequently Asked Questions
What happens if I cancel my policy mid-term?
You may obtain a prorated refund, but if you still have employees, you instantly become a non-subscriber and must obey all related reporting rules.
Are corporate officers excluded?
Texas allows you to exclude up to two officers, but you must file a waiver form with your insurer and the DWC.
Does workers comp cover COVID-19?
Yes, if the employee proves the virus was contracted in the course and scope of employment. First responders benefit from a presumption of coverage under Senate Bill 22.
How does Texas compare to other states?
While Texas is optional, most nearby states—such as Workers Compensation Insurance in Oklahoma and Workers Compensation Insurance in Louisiana—mandate coverage. Premium rates in Texas also trend lower, similar to its auto market where consumers enjoy competitive pricing for best car insurance in Texas.
Key Takeaways
- Carrying workers comp in Texas is voluntary for most private employers—but lawsuits are not.
- Premiums depend on classification, payroll, and your claims history, with average rates between $0.55 and $2.25 per $100 of payroll.
- Non-subscribers must file annual paperwork, post notices, and face unlimited liability in court.
- Effective safety programs and proper employee classification are the fastest ways to shrink costs.
- Compare quotes from several carriers or enlist an experienced agent to navigate special coverages like maritime endorsements.
By weighing the comparatively small price of insurance against the potentially catastrophic cost of an uncovered injury, most Texas businesses conclude that becoming a subscriber is the safest—and smartest—decision.