Texas business insurance requirements

Texas is the best-known state where most private employers can legally opt out of workers' compensation (South Dakota, by its labor department's account, also has no law requiring it). An employer that buys a policy is a "subscriber"; one that does not is a "nonsubscriber," which must file an annual notice and gives up the defenses that usually win injury lawsuits. Everything else about a Texas business insurance program, from coastal windstorm to trucking verdicts, follows from the size of the state's exposures.

Workers' compensation requirements

Labor Code 406.002 says that, except for public employers, "an employer may elect to obtain workers' compensation insurance coverage" (Tex. Lab. Code ch. 406). The Texas Department of Insurance puts it plainly: private employers can choose to carry coverage, "but it is not required in most cases," while every governmental entity must have it (TDI). TDI's 2022 survey found 75% of private employers and 83% of private-sector employees in the system; small employers are the likeliest to opt out.

Opting out comes with paperwork. A nonsubscriber files DWC Form-005 every year between February 1 and April 30 (Labor Code 406.004 makes failing to notify the division an administrative violation), posts Notice 5, tells each new hire in writing, and, with five or more employees, reports qualifying injuries monthly on Form-007. The price is Labor Code 406.033. In an employee's injury suit, a nonsubscriber may not argue that the worker was contributorily negligent, assumed the risk or was hurt by a co-worker's negligence, and pre-injury waivers are void. Damages are not limited to a comp benefit schedule. Our texas nonsubscribers: opting out of workers' comp guide covers the filings, TDI's survey data and the post-injury waiver rules.

Construction is where the "optional" label wears thin. A governmental entity that awards a building or construction contract must require the contractor to certify comp coverage for every employee on the public project, and each subcontractor must hand its certificate up the chain (406.096). Most large private general contractors write the same requirement into their subcontracts, so a nonsubscribing sub often cannot get on the job. Collect a certificate of insurance from every sub and read our General contractor insurance guide.

Subscribers buy from private carriers or from Texas Mutual, which replaced the old Texas Workers' Compensation Insurance Fund and, by statute, may not refuse a risk that tenders premium, except as the chapter allows, because it is the insurer of last resort (Tex. Ins. Code ch. 2054). Texas therefore has no NCCI assigned risk pool. Large employers can self-insure through DWC certification. NCCI's class codes and experience rating apply. Nonsubscribers who want protection for negligence suits buy nonsubscriber employer's liability or occupational accident coverage, whose terms vary by form; see employers' liability insurance and workers' compensation insurance: how it works.

Disability and paid leave mandates

Texas has no state disability insurance program and no paid family and medical leave program. Disability income is a voluntary benefit. Multistate employers should check state disability and paid family leave programs: every mandate in 2026 for workers based elsewhere.

Commercial auto requirements

The minimum financial responsibility limits are $30,000 per person and $60,000 per accident for bodily injury and $25,000 for property damage (Tex. Transp. Code 601.072; TDI). Intrastate motor carriers registered with the Texas Department of Motor Vehicles file proof of insurance (Form E), and the minimum for a commercial vehicle over 26,000 pounds is $500,000, with higher amounts for hazardous materials and buses (43 TAC 218.16 table). Interstate for-hire carriers need at least $750,000. See commercial auto insurance: what it covers and what it leaves out, FMCSA insurance requirements and filings for motor carriers and Trucking company insurance.

The business insurance market in Texas

Texas carries every kind of catastrophe. FEMA major disaster declarations in recent years include the February 2021 winter storms (DR-4586), Hurricane Beryl in July 2024 (DR-4798), the July 2025 flooding that began July 2 (DR-4879) and severe storms, tornadoes and flooding beginning July 12, 2026 (DR-4935). Hail drives roof claims inland, and coastal accounts face named storm deductibles: how percentage wind deductibles work. Flood is excluded from standard property forms, and NFIP commercial policies top out at $500,000 building and $500,000 contents (FloodSmart); see Commercial flood insurance: NFIP limits and private options.

The Texas Windstorm Insurance Association is the coast's insurer of last resort for wind and hail on homes and commercial property denied in the voluntary market. It covers only direct wind and hail damage, not flood or storm surge (TWIA). Many coastal businesses pair a TWIA policy with a private all-risk policy that excludes wind.

Surplus lines premium carries a 4.85% tax paid to the Comptroller (Comptroller) and a 0.04% stamping fee for policies incepting on or after January 1, 2024 (SLTX). See surplus lines taxes, stamping fees and diligent search.

Liability law that affects premiums

Texas uses proportionate responsibility: a claimant more than 50% responsible recovers nothing (CPRC 33.001). Exemplary damages are capped at the greater of twice economic damages plus noneconomic damages up to $750,000, or $200,000, with exceptions for certain felonies (41.008). In commercial motor vehicle cases, the 2021 reform in chapter 72 lets a defendant ask for a bifurcated trial, with compensatory damages decided first and exemplary damages second, and limits how a plaintiff can try negligent entrustment once the employer stipulates the driver was acting in the course of employment (ch. 72). Trucking remains among the hardest lines to place here; see nuclear verdicts and social inflation: why liability costs keep rising.

Construction contracts are shaped by Insurance Code chapter 151, which voids clauses requiring a sub to indemnify or defend another party against that party's own negligence, with an exception for claims by the indemnitor's own employees, and voids additional insured requirements to the same extent (ch. 151). See indemnification and hold harmless clauses and your insurance.

Injury and property damage suits must be filed within two years (16.003); most contract claims within four (16.004 for debt, and the residual period in 16.051).

Insurers based in Texas

• Texas Mutual, headquartered in Austin, is the state's largest comp writer and its insurer of last resort; it wrote $941.9 million of workers' comp in 2025 by NAIC data.
• Skyward Specialty is a Houston-based specialty and E&S insurer.

Where to get help

• Texas Department of Insurance (tdi.texas.gov): Help Line 800-252-3439, weekdays 8 a.m. to 5 p.m. Central. File a complaint against an insurer or agent online through TDI.
• Division of Workers' Compensation (tdi.texas.gov/wc): 800-252-7031. It takes DWC-005 filings, verifies coverage ([email protected]) and lists registered nonsubscribers on the Texas Open Data Portal.

Confirm your obligations with DWC, an attorney or a licensed broker, and compare states with the workers' comp and benefits requirements by state.