What does workers’ compensation insurance cover in Texas—and does my business need it?

By Mark Melliand, owner, Melliand Insurance Agency · 13 years as an independent agent · Published October 26, 2026

The short answer: Workers’ compensation insurance may provide benefits to employees for covered work-related injuries and illnesses, including medical care and income benefits. Most Texas private employers can choose whether to carry it (Texas Labor Code §406.002), but choosing isn’t the same as having no obligations. Contracts, leases and public construction projects may require it, and employers without it still have notice duties and different lawsuit exposure. The right answer depends on your business, your contracts and your exposures.

What workers’ compensation may provide

Workers’ compensation benefits in Texas generally fall into these categories (Texas Department of Insurance, Division of Workers’ Compensation):

• Medical benefits. Payment for reasonable and necessary medical care to treat a work-related injury or illness.
• Income benefits. Income benefits include temporary, impairment, supplemental and lifetime income benefits. Their purposes and eligibility requirements differ; impairment income benefits are not simply wage replacement.
• Death benefits. Help for eligible family members when an employee dies because of a work-related injury or illness (TDI-DWC).
• Burial benefits. Payment of some funeral expenses to the person who paid them (TDI-DWC).

Benefit amounts and eligibility are set by Texas law and rules and depend on the facts of each claim. Not every workplace injury qualifies.

For employees covered by workers’ compensation insurance, recovery of benefits is generally the exclusive remedy against the employer for a work-related injury or death, with a statutory exception allowing certain survivors to seek exemplary damages for a death caused by an intentional act or omission or gross negligence (Texas Labor Code §408.001). Coverage doesn’t eliminate every lawsuit.

Workers’ compensation vs. employers liability

A workers’ compensation and employers liability policy commonly has two distinct parts:

• Part One — workers’ compensation pays the benefits required by the workers’ compensation law. Those statutory benefits aren’t chosen as a dollar limit.
• Part Two — employers liability may respond to certain lawsuits related to employee injuries that fall outside statutory benefits, such as some third-party-over actions, consequential injury to a family member, dual-capacity suits and claims for care and loss of services (IRMI). It has its own dollar limits and terms (Big “I” Virtual University, industry reference).

Employers liability isn’t a substitute for statutory workers’ compensation, and it doesn’t protect against every employee lawsuit. Check the limits and exclusions on your actual policy.

Does a Texas business have to carry it?

• Generally elective for private employers. “Except for public employers and as otherwise provided by law, an employer may elect to obtain workers’ compensation insurance coverage” (Texas Labor Code §406.002).
• Public construction projects. A governmental entity that enters into a building or construction contract must require the contractor to certify coverage for each employee on the public project, and subcontractors on the project must provide certificates too (Texas Labor Code §406.096).
• Contracts and leases. A customer contract, lease or project agreement can require workers’ compensation, and specific employers liability limits, even when Texas law doesn’t. That’s a contract obligation, set by the contract’s wording.

There’s no single employee-count rule that decides this for every business. Check both the law and your contracts.

What being a non-subscriber means

A non-subscriber is an employer that does not provide Texas workers’ compensation coverage, whether through a licensed insurer or approved self-insurance (Texas Labor Code §406.003). Not providing coverage doesn’t remove employer obligations or injury exposure. At a high level:

• Notice to employees. Employers must notify employees whether or not they have coverage, including new hires and a posted notice (Texas Labor Code §406.005).
• Notice to the division. Non-subscribers generally must file DWC Form-005, including annually between February 1 and April 30, with other filing triggers such as hiring a first employee, ending coverage or a request from DWC. Employers whose employees are exempt from coverage, such as certain domestic or farm and ranch workers, may not need to file (DWC Form-005 instructions).
• Injury reporting. A non-subscriber that employs five or more employees who are not exempt from workers’ compensation coverage must report certain work-related injuries, illnesses and deaths on DWC Form-007 (DWC Form-007 instructions).
• Lawsuits. In an applicable lawsuit by an employee who isn’t covered by workers’ compensation insurance, the employer can’t defend on the grounds of the employee’s contributory negligence, assumed risk or a fellow employee’s negligence, and the employee must prove the employer’s negligence (Texas Labor Code §406.033). Whether and how this applies depends on the facts.

For current requirements, see TDI-DWC’s employer forms and notices and its non-subscriber fact sheet. This isn’t a complete compliance list.

Other insurance isn’t a substitute

• General liability. A standard general liability form excludes obligations under workers’ compensation and similar laws, and bodily injury to the insured’s employees arising out of their employment, subject to the form’s exceptions (sample general liability form CG 00 01, illustrative).
• Health insurance. Health plans are different products. Don’t assume one pays for work injuries, provides workers’ compensation income benefits, or gives an employer the legal protections tied to workers’ compensation coverage (Texas Labor Code §406.033).
• Occupational accident coverage. One Texas workers’ compensation insurer describes occupational accident policies as limited coverage that isn’t workers’ compensation and notes they may not include employers liability (Texas Mutual, insurer guidance). Review what any such policy actually provides.

Owners, officers, employees and subcontractors

• Sole proprietors, partners and corporate executive officers. If a business entity elects coverage, a sole proprietor, partner or corporate executive officer is entitled to benefits as an employee unless specifically excluded by an endorsement, and certain of them may be excluded (Texas Labor Code §406.097).
• Other owners. Other business types, such as an LLC, may raise different questions. Review the owner’s status and whether the policy includes or excludes them.
• Employees. Include everyone on payroll, full- and part-time, in the discussion.
• Independent contractors and subcontractors. Calling someone an independent contractor, paying by the project or issuing a 1099 does not by itself determine workers’ compensation status. Applicable Texas provisions, the actual working relationship and any coverage agreements require review.

How the questions fit together

Question or exposure	What to understand	What to verify
Is coverage required by law?	Generally elective for Texas private employers; public employers and public construction projects differ	Whether any legal requirement applies to your business or project
Do contracts or leases require it?	Contracts can require coverage the law doesn’t, and may specify employers liability limits	Exact contract wording, required limits and certificates
What benefits may be provided?	Medical, income, death and burial benefits for covered work-related injuries and illnesses, set by Texas law	Benefit rules for your situation, from TDI-DWC
What does employers liability add?	Certain employee-injury lawsuits outside statutory workers’ compensation benefits, subject to its own limits	Employers liability limits and exclusions
Not providing coverage	Notice and reporting duties, and loss of certain defenses in applicable lawsuits	TDI-DWC’s current requirements and exemptions
Owners and officers	Treatment depends on the business type, Texas law and the policy	Inclusion or exclusion endorsements
Subcontractors and contractors	A label, 1099 or project pay doesn’t settle status	Agreements, the actual working relationship and subcontractors’ own coverage
Other insurance	General liability, health and occupational accident policies aren’t substitutes	What each policy actually provides and excludes

(Texas Labor Code ch. 406; TDI-DWC)

What insurers ask about

Workers’ compensation premiums in Texas are generally based on payroll assigned to Texas classification codes that depend on the type of work, and adjustments such as an experience modifier based on past losses may apply (TDI rate guide). Expect questions about payroll by job duty, what employees actually do and your claims history. For more detail, see our guide to what information you need for a workers’ compensation quote in Texas.

Two hypothetical examples

These examples are illustrations, not real clients. They show questions to review, not claim outcomes or legal advice.

A landscaping company without coverage

• Assumptions: Six employees and no workers’ compensation coverage. A new commercial customer’s contract requires workers’ compensation and employers liability with stated limits, plus a certificate.
• Questions to review: What exactly does the contract require? Statutory workers’ compensation benefits are set by Texas law, while the employers liability limits the contract names are separate dollar limits to compare with a policy. Has the business met its current non-subscriber notice, filing and reporting requirements? What lawsuit exposure would a serious employee injury create?

A consulting LLC with an owner and project helpers

• Assumptions: An LLC with two employees. Its owner works in the business. It brings in two helpers paid by the project.
• Questions to review: How would the owner be treated under the policy and Texas law, and should the owner be included or excluded? Are the helpers employees or independent contractors, based on applicable Texas provisions and the actual working relationship? Do any helpers have their own coverage? Which classification codes fit the employees’ actual duties?

Checklist for a discussion with Mark

• What your employees actually do, and payroll by type of work
• Owners, partners, officers or members, and whether each should be included
• Subcontractors and contractors, and any agreements or certificates
• Contracts and leases that mention workers’ compensation or employers liability limits
• Any current workers’ compensation or alternative policy
• Prior claims history, if any

Don’t send Social Security numbers, banking details or employee medical information through ordinary email or a website form. If an insurer needs sensitive information, ask for an appropriate secure way to provide it.

Talk through your needs

Melliand Insurance Agency is an independently operated insurance agency affiliated with Premier Group Insurance (PGI), a nationwide agency network. Availability of any coverage depends on your business and the insurer’s underwriting.

To discuss workers’ compensation for your business, call (972) 346-4666 or email melliandinsurance@gmail.com. Hours are Monday–Friday, 8 AM–5 PM Central. There is no walk-in office. In-person visits are available by appointment at your home or business throughout the Dallas–Fort Worth area.

References

Texas law

• Texas Labor Code, Chapter 406: Workers’ compensation insurance coverage (§§406.002, 406.003, 406.005, 406.033, 406.096, 406.097)
• Texas Labor Code, Chapter 408: Workers’ compensation benefits (§408.001)

Texas regulator

• TDI-DWC, Workers’ compensation benefits
• TDI-DWC, Death and burial benefits
• TDI-DWC, Employer forms and notices
• TDI-DWC, DWC Form-005, non-subscriber notice (Rev. 01/25)
• TDI-DWC, DWC Form-007, employer’s report of noncovered employee’s injury or illness (Rev. 01/25)
• TDI-DWC, Employers without coverage (non-subscribers) fact sheet
• TDI, Texas workers’ compensation rate guide

Sample policy form (illustrative only)

• Commercial General Liability Coverage Form CG 00 01 (2007 edition), insurer forms library copy

Insurer guidance (general description, not policy terms)

• Texas Mutual, Don’t Dare to Go Bare

Industry references

• IRMI, Employers liability coverage
• Big “I” Virtual University, Employers’ liability: a primer (Chris Boggs)

This guide is general information, not legal advice or a statement of coverage, eligibility or price. Actual policy wording and Texas law control. Requesting a quote does not bind coverage.