Texas Workers' Compensation Insurance

Texas is the only state where workers' compensation coverage is optional for most private employers. A business that chooses not to carry it is called a non-subscriber, and there is no employee-count threshold that forces coverage for most private employers. The major exception is government building and construction contracts: a governmental entity's construction contract generally must require the contractor, and its subcontractors, to maintain workers' compensation coverage for the duration of the work. See the Texas Department of Insurance, Division of Workers' Compensation's employer guidance.

Texas expects a hiring business to be able to support a worker's independent contractor status, and misclassifying employees as 1099 contractors can expose the hiring business to liability it thought it had avoided. On government building and construction contracts, Texas law generally requires the coverage obligation to flow down to subcontractors as well as the prime contractor, so verifying a subcontractor's coverage is important even on projects where coverage isn't otherwise mandatory.

For employers that do subscribe, injured workers receive necessary medical treatment with no dollar cap. Temporary income benefits are generally paid at 70% of the difference between the worker's average weekly wage and their post-injury earning capacity (or a higher percentage for lower-wage workers), subject to a maximum tied to the state average weekly wage, which is reset annually (temporary income benefits are capped at $1,271.00 per week for injuries dated October 1, 2025 through September 30, 2026). Impairment income benefits, supplemental income benefits, lifetime income benefits, and death benefits each have their own rules and caps under Texas law.

Texas's small-business economy spans contractors and trades across its metro areas, restaurants and hospitality, salons and personal-care businesses, professional and energy-sector services firms, and logistics operations tied to the state's highway and port infrastructure, many of which carry coverage voluntarily even though Texas doesn't require it.