Do Texas Small Businesses Need Workers' Compensation Insurance?

Here are 5 reasons a Texas business should carry workers’ compensation.

1. Financial Shield Against Workplace Injuries

No matter how strong your safety protocols are, workplace accidents can happen when you least expect them. When an employee is injured on the job, workers’ compensation insurance helps cover medical bills, lost wages, and rehabilitation expenses associated with those injuries. Without this protection, Texas small businesses may be forced to pay these costs out of pocket. This oversight could potentially cause serious financial strain far beyond the small savings you may have made by not purchasing a workers’ compensation policy.

Let’s just imagine: If an employee injures their hip while lifting a heavy box and needs surgery, medical expenses alone could climb into the tens of thousands of dollars. With a workers’ compensation insurance policy in force, those costs are covered. Without it, the business would be financially responsible for the full amount.

2. Shielding from Lawsuits

In Texas, employers that choose not to carry workers’ compensation insurance are classified as non-subscribers. Non-subscribers face a significantly higher risk of being sued by injured employees because they forfeit key legal protections that workers’ compensation provides. Typically, workers’ compensation provides employees with guaranteed benefits for workplace injuries while limiting their ability to sue their employer. Without this safeguard, non-subscribers may be exposed to expensive lawsuits, including substantial settlements or court judgments.

Let’s just imagine: If an employee slips and falls on a wet floor, they may pursue a negligence lawsuit against the employer when workers’ compensation coverage is not in place. Even the cost of legal defense can be financially overwhelming, and there is the risk of paying a large settlement.

3. Showing Compassion and Care to Your Employees

Because it is not required in Texas for employers with fewer than 50 employees, offering workers’ compensation insurance is both an investment and a statement that a business prioritizes its employees’ health and safety. This can lead to a strong reputation, helping recruit and retain quality workers. Employees have peace of mind knowing they are covered in the event of an accident, which can lead to improved morale, loyalty, and performance.

Let’s just imagine: A small plastic manufacturing business that carries workers’ compensation insurance. Those employees, especially in Texas, know that their employer cares about them and what they mean to the company. It also shows that they are a true investment and a partner in the business's success.

4. Compliance with Customers and Subcontractors

Some clients, contractors, and businesses may require proof, such as a Certificate of Insurance or workers’ compensation coverage, before finalizing a contract. This is especially common in industries where the risk of injury is higher. Having a workers’ compensation policy in force helps businesses avoid missing out on valuable opportunities. More importantly, it helps protect the hiring business from potential financial loss or expensive audits on their own insurance policies.

Example: A small landscaping company without workers’ compensation coverage might be disqualified from bidding on HOA projects that require subcontractors to have coverage.

5. Faster Recovery and Earlier Return to Work

Workers’ compensation insurance often includes return to work and rehabilitation programs that support injured employees in recovering as quickly and safely as possible. Insurers typically coordinate access to medical specialists, physical therapy, and rehabilitation services, helping streamline the recovery process. This benefits employees by ensuring proper care while also reducing downtime and preventing misuse of benefits.

Example: An employee with a minor workplace injury may receive physical therapy through the workers’ compensation provider, allowing them to return to work sooner and at a lower overall cost than if the employer arranged treatment independently.