Texas is unusual: workers' compensation is optional for most private employers. But if you have employees and skip it, you must file a notice with the state every year. Some trade licenses require liability insurance, and business vehicles need commercial auto coverage.
Workers' Compensation Is Optional (With Paperwork)
Private Texas employers can choose whether to carry workers' compensation. Employers without it are called non-subscribers.
If you're a non-subscriber with at least one employee who isn't exempt, you must file DWC Form-005 with the Texas Department of Insurance, Division of Workers' Compensation:
- Within 30 days of hiring your first employee.
- Every year between February 1 and April 30.
- Within 10 days of ending a workers' comp policy, or within 10 days of the state asking.
The Trade-Off of Skipping Workers' Comp
Non-subscribers must post a notice to employees and can face lawsuits from injured employees with fewer legal defenses than employers who carry coverage. Many general contractors and public projects also require subcontractors to carry workers' comp.
Insurance Required by Licenses
- Electrical contractors (TDLR): $300,000 per occurrence / $600,000 aggregate / $300,000 products-completed operations.
- HVAC contractors (TDLR): Class A $300,000 / $600,000 / $300,000; Class B $100,000 / $200,000 / $100,000.
- Plumbing companies: the Responsible Master Plumber must carry at least $300,000 in commercial general liability.
- Many cities require proof of insurance to register or pull permits, and commercial clients often ask for higher limits in contracts.
Other Coverage Most Businesses Should Consider
- General liability: covers injuries and property damage your business causes to others.
- Commercial auto: personal auto policies often exclude business use, and Texas requires liability coverage on every vehicle.
- Professional liability (errors and omissions or malpractice): important for consultants and licensed professionals, including PLLC owners.
- Property and business interruption: covers equipment, inventory, and lost income after a covered event.
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Common Mistakes
Hiring employees without workers' comp and never filing DWC Form-005.
Using a personal car insurance policy for business driving.
Letting license-required liability insurance lapse.
Frequently Asked Questions
Is workers' compensation required in Texas?
Not for most private employers. But non-subscribers with employees must file DWC Form-005 with the state, including every year between February 1 and April 30.
What insurance does a Texas electrical contractor need?
Commercial general liability of at least $300,000 per occurrence, $600,000 aggregate, and $300,000 for products and completed operations.
Official Sources
This guide is general information, not legal, tax, or insurance advice. Requirements can change; verify with the agency before acting.
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