Workers' Compensation Texas

Jump ahead to learn:

• Is Texas Workers’ Compensation insurance required?
• How does Workers’ Comp in Texas work?
• What could Workers’ Compensation insurance in Texas include?
• Who qualifies for an exemption from State of Texas Workers’ Comp?
• How much does Workers’ Comp cost in Texas?
• How ERGO NEXT helps protect Texas business owners

Is Texas Workers’ Compensation insurance required?

Unlike most other states, State of Texas law does not require most businesses to carry workers’ compensation insurance.

That said, Texas law does require workers’ comp coverage for many employers:

• If you work for a Texas governmental entity — including public schools, utilities, cities and counties — you’ll most likely need workers’ comp.
• Contractors and vendors working with any public employer (city, county or state agencies) also require coverage. 
• Building and construction contractors for public employers are required to carry workers’ comp.
• Buses and companies that provide transportation on public highways are usually required to cover their employees with workers’ comp.
• Liquid propane gas and compressed natural gas dealers usually need coverage.
• Businesses that employ inmates in work furlough programs are also required to carry workers’ compensation insurance.

Even if it’s not required by state law, many construction businesses buy workers’ compensation coverage because project owners, municipalities, and general contractors often require proof of coverage (called a certificate of insurance, or a COI) before they’ll work with you.

But accidents that cause injuries can happen anywhere — even at desk jobs. Going without Texas workers’ compensation insurance could mean you’re responsible for expenses if an employee suffers a work-related illness or injury.

How does Workers’ Comp in Texas work?

Texas workers’ compensation works differently than most other states. Employers can choose to be a subscriber (meaning they carry workers’ comp insurance) or a non-subscriber (meaning they don’t carry workers’ comp insurance). That choice could have major financial and liability consequences for businesses.

Here’s how workers’ compensation works, per the Texas Department of Insurance, Division of Workers’ Compensation (TDI-DWC):

1. Report the injury. Under Texas law, employees generally must notify their employer within 30 days of the injury or of learning that an illness may be work-related. Employers must then report it to their insurance carrier. Employers with five or more employees may have additional reporting obligations to TDI-DWC if a work-related injury, illness, or fatality results in more than one day of lost time from work. Reporting requirements differ for subscribers and non-subscribers.
2. Get medical care. If your business uses a certified workers’ comp health care network, the employee must choose a doctor from that network. If your business doesn’t use a network, the employee can choose any authorized medical provider. If the business participates in a certified workers’ compensation health care network, employees generally must use network providers for non-emergency treatment to ensure benefits are covered.
3. The insurer reviews the claim. The insurance carrier reviews the claim and determines what benefits apply based on the nature and severity of the injury. If the workers’ compensation claim isn’t denied within 15 days of receiving notice of injury, the carrier must begin paying or deny the claim in writing.
4. Benefits are paid. The insurance company coordinates payment for authorized medical treatment and income benefits if the employee can’t work.
5. The employee returns to work or receives ongoing benefits. When medically cleared, the employee returns to their role. If the injury results in a permanent impairment, ongoing disability benefits may apply.

If you’re a subscriber, employers generally receive protection under Texas’s exclusive remedy provisions, which means employees who receive workers’ compensation benefits typically cannot sue their employer for o the claim.

If you’re a non-subscriber, employees retain the right to sue your business in civil court. Without workers’ comp protections, employers could lose three key legal defenses, pursuant to Texas Labor Code section 406.033:

1. You can’t argue the employee’s own negligence caused the injury.
2. You can’t argue that a fellow employee caused the injury.
3. You can’t argue that the employee knowingly accepted the risk.

Without these legal defenses, your business may be subject to liability and significant financial exposure.

If you own a small tile company in Houston and your employee breaks their leg, the outcome could be different for subscribers and non-subscribers. If you’re a subscriber, workers’ comp could help cover the costs of their emergency care, follow-up treatment and lost wages — and they generally can’t take legal action against your business . If your business is a non-subscriber and that employee sues you, it could face full liability.

What could Workers’ Compensation insurance in Texas include?

Texas workers’ comp insurance could help pay for expenses related to work-related injuries and illnesses for employees. Employers could also add themselves to their policy with optional business owners coverage.

In Texas, a workers’ compensation policy could help pay for: 

• Emergency treatment and medical expenses.
• Lost wage income benefits.
• Death and survivor benefits.

• Retraining if the employee can no longer do their job.
• Permanent injury or disability benefits.

For example: If you own a landscaping business in Dallas and one of your workers suffers a serious back injury, workers’ comp could help cover their medical treatment and a portion of their lost wages while they recover.

But if your company doesn’t provide workers’ compensation insurance, injured employees could file a lawsuit to recover medical expenses or lost wages after a workplace injury. 

Workers’ compensation doesn’t usually cover some forms of misconduct, intoxication or other statutory exclusions. 

Texas Workers’ Comp income benefits

Texas uses different terminology and benefit calculations from most other states. Here’s what benefits employees may be eligible for, according to Texas state laws: 

1. Temporary income benefits (TIBs): If a doctor confirms the employee can’t work at all or earns less due to their injury, they could receive 70% of their average weekly wage (or 75% for lower-wage workers) for up to 104 weeks. The maximum weekly benefit is set annually by the TDI-DWC. There’s a seven-day waiting period, retroactive if the disability lasts more than 14 days.
2. Impairment income benefits (IIBs): Once an employee reaches their maximum medical improvement (MMI), if they have a permanent impairment rating, they receive IIBs at 70% of their average weekly wage, paid for three weeks per percentage point of impairment.
3. Supplemental income benefits (SIBs): If an employee has a 15% or greater impairment rating and hasn’t returned to work after IIBs end, they may qualify for supplemental income benefits, paid quarterly.
4. Lifetime income benefits (LIBs): For the most severe injuries — including total blindness, loss of both hands or feet, severe brain injury or paralysis — employees may receive lifetime income benefits at 70% of their average weekly wage, plus a 3% annual cost-of-living adjustment.

Death and survivor benefits in Texas Workers’ Comp

In the unfortunate event of the death of an employee after an on-the-job injury, their eligible family members could receive survivor benefits equal to 75% of the deceased worker’s average weekly wage, subject to state maximums. 

These benefits are available to eligible family members which could include: 

• A surviving spouse.
• Children under 18, under 25 if a full-time student or any age if the child is dependent due to a physical or mental disability.
• A grandchild who was at least 20% dependent on the deceased if the child’s parent isn’t eligible for death benefits.

Texas workers’ comp death benefits could also cover burial expenses up to $10,000, plus reasonable transportation costs if the death occurred away from the employee’s usual place of employment. 

Who qualifies for an exemption from State of Texas Workers’ Comp?

Because workers’ comp is optional for most private employers in Texas, exemptions work differently than in other states.

Private employers can choose not to carry coverage. Non-subscribers (businesses who choose not to carry coverage) must file DWC Form-005 (Notice of Non-Coverage) with the TDI-DWC:

• Within 30 days of hiring your first employee
• Within 10 days of ending your coverage
• And annually between February 1 and April 30

Non-subscribers must also post a notice in the workplace in English, Spanish and any other language employees speak.

If you choose not to carry workers’ comp, the financial and legal risks of being a non-subscriber could be significant.

If your business is a subscriber, some employees may be exempt from workers’ comp coverage, including: 

• Certain domestic workers
• Certain farm and ranch workers
• Federal government employees (covered under federal law)

How much does Workers’ Comp cost in Texas?

Workers’ compensation costs vary across industries. Some factors that could influence your monthly or annual price (also called a premium) include:

• Your number of employees.
• The type of work your employees do and their assigned class codes.
• Your total payroll.
• Your insurance claims history and workplace safety record.
• The locations in Texas where you do business.

Texas uses the NCCI classification system to set baseline rates. Because coverage is optional for most private employers, the Texas market can be competitive.

To see the exact cost of workers’ compensation coverage for your business, get a free, no-obligation quote from ERGO NEXT.

How ERGO NEXT helps protect Texas business owners

ERGO NEXT has Texas workers’ comp insurance that’s fast and flexible – and you can buy it 100% online in about 10 minutes.

Share unlimited certificates of insurance at no extra cost, and manage your policy 24/7 via web or mobile app.

If you have questions, our licensed, U.S.-based insurance professionals are available to help.

Start a free quote with ERGO NEXT.

More resources for small business owners

• Small business insurance in Texas
• General Liability insurance in Texas
• Texas Professional Liability insurance
• Texas Errors & Omissions insurance
• What to do when an employee is injured at work
• Does a sole proprietor need Workers’ Compensation insurance?
• How to file a Workers’ Comp claim
• What is a Workers’ Compensation audit?
• How does a Workers’ Comp claim affect the employer?
• What is a monopolistic state for Workers’ Comp?
• What is a Workers’ Comp exemption?