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Workers’ Compensation Insurance Requirements in Texas
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Workers’ Compensation Insurance Requirements in Texas
Texas is the only state in the country that does not require most private employers to carry workers’ compensation insurance. But ‘optional’ doesn’t mean ‘no risk’ — non-subscribing employers lose key legal defenses and can face uncapped lawsuits, and most general contractors require subcontractors to carry a policy before they’ll sign a contract. For working Texas contractors, coverage is less about state law and more about staying employable and protected.
Texas Workers’ Compensation Legal Requirements
Under Texas Labor Code Section 406.002, workers’ compensation coverage is voluntary for almost all private employers. The main exceptions are contractors on certain government or public-works construction contracts, where coverage is required by the contracting agency.
- Texas is the only state that does not mandate workers’ comp coverage for most private employers
- Contractors on government building/construction contracts are often required to carry coverage as a condition of the contract
- Non-subscribing employers with 5+ employees must file DWC Form-5 (Employer Notice of No Coverage) annually with the Texas Department of Insurance Division of Workers’ Compensation by April 30
- Many general contractors and property owners contractually require subcontractors to carry workers’ comp before they’ll award work, regardless of state law
How Texas’s Workers’ Comp System Works
System type: Voluntary Coverage
Employers who choose to carry workers’ comp are called ‘subscribers,’ and among those subscribers, Texas actually runs a competitively priced market — the state ranked 40th of 51 states/DC in the 2024 Oregon DCBS Workers’ Compensation Premium Rate Ranking Study, with an index rate of 0.78, or about 72% of the national median. Employers who opt out are ‘non-subscribers’: they skip the state system entirely but lose the legal protections that come with it. Instead of a no-fault claims process, injured employees of non-subscribers can sue directly in civil court.
How Texas’s Rates Compare by Trade (Among Subscribing Employers)
| Trade (NCCI Class Code) | National Rank (of 51) | Rate per $100 of Payroll |
|---|---|---|
| Roofing (Class 5551) | 46th of 51 | $2.57 |
| Electrical Wiring (Class 5190) | 23rd of 51 | $2.51 |
| Plumbing NOC (Class 5183) | 37th of 51 | $2.13 |
Source: Oregon Dept. of Consumer and Business Services, 2024 Workers’ Compensation Premium Rate Ranking Study (published June 2025) — the only study benchmarking all 50 states plus DC on a common industry mix.
Filing a Workers’ Comp Claim in Texas
For subscribing employers, an injured worker reports the injury, the employer’s carrier opens a claim, and benefits (medical care and wage replacement) are paid through the no-fault system administered by the TDI Division of Workers’ Compensation. Employees of non-subscribing employers can’t file a comp claim at all — instead, they pursue a personal-injury lawsuit against the employer, and because the employer isn’t a subscriber, it can’t use contributory negligence, assumption of risk, or the fellow-servant defense to shield itself.
Penalties for Non-Compliance
Going without coverage isn’t illegal, but it carries real exposure: non-subscribers lose the common-law defenses of contributory negligence, assumption of risk, and the fellow-servant rule, face uncapped lawsuit damages, and employers with 5+ employees must file DWC Form-5 with the state every year to formally declare their non-subscriber status.
Resources: TDI Division of Workers’ Compensation — Nonsubscribers, TDI Employer FAQ, Texas Department of Insurance — Division of Workers’ Compensation
How Much Does Workers’ Comp Insurance Cost in Texas?
Because coverage is voluntary, Texas premiums are driven by a competitive private market rather than a state-set rate. Among employers who do subscribe, rates for common trades look like this:
| Trade | Estimated Cost per $100 Payroll | What Drives It |
|---|---|---|
| Roofing | $2.57 (per the Oregon study’s Class 5551 rate) | High fall-risk exposure keeps roofing among the priciest trades nationally |
| Electrical | $2.51 (Class 5190) | Shock and fall hazards, though claims severity trends lower than roofing |
| Plumbing | $2.13 (Class 5183) | Moderate injury risk from lifting, tools, and confined spaces |
What Moves the Price Up or Down
- Whether you subscribe at all — non-subscribers pay no state premium but take on direct lawsuit risk instead
- Claims history and experience modifier, which can swing premiums well above or below the base class rate
- Payroll size, since premium is calculated per $100 of payroll
- Contractual requirements from general contractors — many GCs won’t award work without proof of coverage, making it a cost of doing business regardless of state law
Rates cited above come from the Oregon DCBS 2024 Workers’ Compensation Premium Rate Ranking Study (effective July 1, 2023) and reflect national benchmark class rates, not a guaranteed quote. Your actual premium depends on your experience modifier, claims history, and payroll — get a personalized quote from Trade Safe.
Frequently Asked Questions
Is workers’ comp required in Texas?
No. Texas is the only state that doesn’t require most private employers to carry workers’ compensation insurance (Texas Labor Code Sec. 406.002). The main exception is certain government/public-works construction contracts. That said, most general contractors on commercial and public jobs require their subcontractors to carry a policy as a condition of the contract, even though the state itself doesn’t mandate it.
What happens if a Texas employer doesn’t carry workers’ comp?
They become a ‘non-subscriber.’ They must post a notice at the worksite, notify employees in writing, and file DWC Form-5 with the Texas Department of Insurance each year if they have 5 or more employees. In exchange for not carrying coverage, they lose common-law defenses (contributory negligence, assumption of risk, fellow-servant rule) if an injured employee sues them.
Can a general contractor require subcontractors to carry workers’ comp in Texas?
Yes, and it’s extremely common. Even though Texas law doesn’t force it, GCs use contract clauses to require subs to carry workers’ comp so the GC isn’t exposed to injury claims flowing up the chain. Contractors without coverage frequently get shut out of bidding on larger commercial and government jobs.
How much does workers’ comp cost for contractors in Texas?
Among Texas employers who do carry coverage, rates are relatively competitive nationally — the state ranked 40th of 51 states/DC (72% of the national median) per the 2024 Oregon DCBS rate study. Trade-specific rates vary: roofing runs about $2.57 per $100 of payroll, electrical about $2.51, and plumbing about $2.13, though your actual premium depends on payroll, claims history, and experience modifier.
Workers’ comp requirements and rates change; verify current rules with the Texas Department of Insurance Division of Workers’ Compensation before making coverage decisions.
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