Workers’ compensation insurance is a key part of protecting employees and businesses when workplace injuries happen. In most states, it’s mandatory for employers to carry this insurance. But Texas is different. If you’re running a business in Texas, you might be wondering: “Do I have to have workers’ comp?”
Is Workers’ Comp Required for Employers in Texas?
The short answer is no—Texas does not require private employers to carry workers’ compensation insurance. It is the only state in the U.S. that makes this coverage optional for most businesses. However, that does not mean you should ignore it. Choosing not to carry workers’ comp, also called “opting out,” comes with serious risks.
In this article, we’ll explain how the system works in Texas, who must have insurance, what happens if you don’t carry it, and why many businesses choose to have it anyway. Everything is written in clear, simple language, so you can easily understand what’s at stake and make the right decision for your business.
What Is Workers’ Compensation Insurance?
Before diving into Texas law, let’s quickly review what workers’ comp actually does. This insurance covers employees who are injured on the job or become ill because of their work. It helps pay for:
Medical bills
Lost wages while the worker recovers
Rehabilitation or therapy
Death benefits for the worker’s family if the injury is fatal
Workers’ comp is a no-fault system, which means the injured employee doesn’t need to prove that the employer did something wrong. In exchange, workers give up the right to sue their employer in most situations.
In states where workers’ comp is required, businesses must carry this insurance or face legal penalties. But Texas is the exception.
Is Workers’ Comp Mandatory in Texas?
In Texas, private employers are not required to carry workers’ compensation insurance. This applies to both small and large companies. Whether you have one employee or one hundred, you have the option to opt out.
Employers who choose not to carry workers’ comp are called “non-subscribers.” Those who do carry it are known as “subscribers.”
It’s important to know that even though coverage is not required, there are rules for both types of employers.
Who Must Have Workers’ Comp in Texas?
While most private businesses in Texas can choose whether or not to carry coverage, there are some exceptions:
Public employers, such as government agencies, must have workers’ comp.
Certain contractors working on public construction projects may be required to carry it by law or contract.
Transportation companies regulated by federal law might need coverage under different rules.
In these cases, workers’ comp is not optional. But for the majority of private businesses, it’s your choice.
What Happens If You Don’t Carry Workers’ Comp?
Even though you’re allowed to opt out in Texas, it’s not a risk-free decision. If you don’t carry workers’ comp, your business is exposed in ways that can be costly.
Here’s what can happen if you’re a non-subscriber:
1. You Can Be Sued by Injured Workers
If one of your employees is hurt on the job and you don’t have workers’ comp, they can file a lawsuit against you. They can sue for:
Medical costs
Lost income
Pain and suffering
Punitive damages
Even worse, you lose certain legal defenses in court. That means you can’t argue that:
The worker was partly at fault
Another employee was at fault
The worker accepted the risk of the job
This makes it much harder to win a lawsuit, and much easier for a court to rule against you. One serious injury could lead to a judgment that damages your business—or even shuts it down.
2. You Must Report Your Non-Subscriber Status
If you decide not to carry workers’ comp, you are required by law to tell the Texas Department of Insurance. You must also tell your employees in writing that you don’t have coverage.
This is not just a formality. If you don’t report your status or fail to notify your employees, you could face fines and legal trouble.
3. You’re Still Responsible for Workplace Safety
Choosing not to carry workers’ comp doesn’t mean you’re off the hook when it comes to safety. You are still responsible for providing a safe work environment under both state and federal law. If you don’t follow safety rules, you could face penalties from OSHA (Occupational Safety and Health Administration).
In short, opting out of workers’ comp does not remove your responsibility to protect your workers.
Why Some Texas Employers Still Choose to Carry Workers’ Comp
Even though it’s not required, many Texas employers still buy workers’ comp insurance. Here’s why:
It Reduces Legal Risk
When you carry workers’ comp, your employees usually can’t sue you for a work-related injury. Instead, they file a claim through the insurance system. This helps avoid lawsuits, court fees, and expensive settlements.
It Protects Your Workers
When someone gets hurt on the job, workers’ comp provides fast access to medical care and wage replacement. This helps your employee heal faster and keeps morale high. Workers who feel cared for are more likely to stay loyal to your company.
It Helps You Win Contracts
If you work with larger companies, government agencies, or in construction, having workers’ comp may be required for the job. Being a subscriber can open up business opportunities that are not available to non-subscribers.
It Shows Responsibility
Carrying workers’ comp tells your employees and your community that you take workplace safety seriously. This helps build a strong reputation, which can lead to better hiring and stronger customer trust.
What Is a Non-Subscriber Plan?
Some employers in Texas who don’t want to carry traditional workers’ comp create what’s called a non-subscriber plan. This is a private injury benefit plan that provides some medical and wage benefits if an employee gets hurt.
However, these plans are not regulated like workers’ comp policies. They may offer less protection, and they don’t protect the employer from lawsuits. In fact, if the plan doesn’t meet the injured worker’s needs, the employee may still sue the business.
If you’re thinking about setting up a non-subscriber plan, it’s a good idea to talk to an experienced attorney and insurance professional. These plans must follow strict rules and be clearly explained to your employees.
Can You Get Workers’ Comp from the State?
Yes. In Texas, employers can get workers’ comp insurance through private insurance companies or through the Texas Mutual Insurance Company, which is the state’s largest provider. Some large employers may also qualify to self-insure if they meet certain financial requirements.
No matter which method you choose, make sure the policy covers your type of business and meets state guidelines.
What Should Employers Consider?
If you own or manage a business in Texas, here are some questions to ask yourself:
Do you have enough savings to cover a lawsuit if an employee is injured?
Can you afford legal costs if you are sued?
Are you working in an industry where injuries are more common?
Do you want to protect your workers and reduce legal risk?
Are you bidding on contracts that require workers’ comp?
If you answered yes to any of these questions, carrying workers’ compensation insurance might be the safer and smarter option—even though it’s not required by law.
Conclusion
So, do you have to have workers’ comp in Texas?
No, most private employers are not legally required to carry workers’ compensation insurance. But that freedom comes with big responsibilities and even bigger risks. If you choose to opt out, you must be ready to face lawsuits, pay for injuries out of pocket, and lose important legal protections.
On the other hand, having workers’ comp can protect your employees, reduce your legal risks, and show that you take workplace safety seriously. In many cases, it’s not just about following the law—it’s about doing the right thing for your business and the people who work for you.
Whether you choose to be a subscriber or not, it’s important to understand your rights and obligations. Talk to a licensed insurance agent or legal advisor who knows Texas law. They can help you choose the best option for your company.
In the end, while Texas gives you the choice, being informed is what truly protects your business.
Related topic:
Top 6 Malpractice Insurance Providers for Nurse Practitioners
