If you’re a Texas business owner with employees, you’ve probably asked this question at least once:
“Do I legally need workers’ compensation insurance in Texas?”
The answer may surprise you.
In Texas, workers’ compensation insurance is not required for most private employers. But just because it’s optional doesn’t mean skipping it is a good idea.
Watch the video or read below and we’ll break down who is covered, what workers’ compensation includes, and why carrying coverage is often one of the smartest risk-management decisions a business owner can make.
Is Workers’ Compensation Required in Texas?
Texas is one of the only states that allows businesses to opt out of workers’ compensation coverage.
However, choosing not to carry workers’ comp can leave your business exposed to:
- Costly medical bills
- Lost productivity
- Employee lawsuits
- Out-of-pocket settlements
While not mandatory, workers’ compensation is often considered a best practice for businesses with employees, subcontractors, or job-site exposure.
Who Is Covered Under Workers’ Compensation Insurance?
Under Texas law, an employee is broadly defined as someone working under a contract of hire—whether written, verbal, or implied.
Here’s where many business owners get tripped up
What About Independent Contractors (1099s)?
Texas does not automatically exclude independent contractors from workers’ compensation exposure.
You may still be responsible for injuries involving contractors unless:
- The contractor carries their own workers’ comp policy and provides a Certificate of Insurance, or
- There is a signed DWC-85 Joint Agreement confirming their independent contractor status
Without one of these in place, an injured contractor could potentially be treated like an employee under your policy—or worse, pursue legal action.
What Does Workers’ Compensation Insurance Cover?
Workers’ compensation insurance is designed to protect employees who suffer job-related injuries or illnesses. Coverage typically includes:
- Medical expenses
Doctor visits, surgeries, medications, and rehabilitation - Wage replacement
Partial income while an employee recovers - Disability benefits
Compensation for temporary or permanent disabilities - Rehabilitation services
Therapy or training to help employees return to work - Death benefits
Financial support for surviving family members, including funeral expenses
In many cases, business owners and executive officers can also elect to be covered under the policy.
Why Workers’ Compensation Is Important for Texas Businesses
Even though it’s optional, workers’ compensation offers powerful benefits for both employers and employees.
For Employees
- Financial support after workplace injuries
- Access to medical care without delay
- Income replacement during recovery
For Employers
- Protection from employee injury lawsuits
- Predictable claim handling
- Reduced financial risk
- Improved employee morale and retention
Your team is one of your biggest investments. Workers’ compensation helps protect that investment while keeping your business running smoothly.
Final Thoughts: Optional Doesn’t Mean Unnecessary
Workers’ compensation insurance may not be required in Texas, but for most businesses, it’s a critical safeguard.
If you have:
- Employees
- Subcontractors
- Physical job-site exposure
- Or plans to grow
…workers’ comp should absolutely be part of the conversation.
At Leal Insurance Services, we help Texas business owners evaluate risk, understand their obligations, and structure workers’ compensation coverage the right way.Workers’ Compensation Insurance in Texas | Is It Required for Employers?
Have questions about workers’ comp or contractor exposure?
Our team is here to help. You can request a quote here or call us at (210) 277-7544