Texas Insurance Compliance
Texas Workers' Compensation Insurance for Contractors
Texas is the only state in the country that does not require private employers to carry workers' compensation insurance. That makes it critical for contractors to understand what workers' comp covers, when general contractors and project owners will require it anyway, and what happens if you skip it. This guide explains what Texas construction contractors need to know.
Is Workers' Comp Required in Texas?
Texas does not mandate workers' compensation coverage for most private employers. However, if you choose not to carry it, you must file a form with the Texas Department of Insurance (TDI) and notify your employees in writing that you are a non-subscriber. As a non-subscriber, you lose certain common-law defenses if an injured employee sues — meaning you can be held fully liable for workplace injuries with no statutory cap on damages. This is why most Texas contractors with employees carry workers' comp even when the state doesn't require it.
What Workers' Comp Covers
Workers' compensation insurance covers medical expenses, lost wages, disability, and death benefits for employees injured on the job. For construction contractors — where falls, equipment injuries, heat illness, and electrical hazards are constant risks — a single serious claim can easily cost six figures. The policy also includes employer's liability coverage, which protects the business if an injured worker files a lawsuit outside the workers' comp system. Most general contractors in Texas will not allow a subcontractor on site without proof of active workers' comp coverage.
How Premiums Are Calculated
Workers' comp premiums are calculated using class codes assigned to your specific operations, your payroll, and your experience modifier (a rate credit or debit based on your claims history). Roofing and high-rise steel work carry higher class codes than interior finish or painting because the injury risk is greater. You can lower your premium through workplace safety programs, return-to-work policies, and by keeping your claims history clean. Premiums are audited annually against actual payroll, so accurate reporting matters.
Sole Proprietors and Subcontractors
Sole proprietors with no employees can often purchase a policy with themselves excluded, which satisfies GC requirements without paying for their own coverage. However, if you use 1099 subcontractors, you may need to cover them under your policy or collect their certificates of insurance. Uninsured subs injured on your job site can file claims against your workers' comp policy or sue you directly as a non-subscriber. Always collect COIs from every subcontractor before they mobilize.
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