Workers’ Compensation Insurance in Texas: Stay Protected, Stay Covered.
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Introduction
Texas is unique among states because it doesn’t allow most private employers to get workers’ compensation insurance. This gives companies more options, but it also means those who skip it face big money and legal dangers.
Texas Workers’ Compensation Requirements
Texas stands out because private employers don’t need workers’ compensation insurance. Still, some businesses must follow the rules, and the state gives specific guidelines for those who choose not to get insurance. Here’s what you should know:
Who Must Have Workers’ Compensation Insurance?
- Public Employers: All state and local government groups must have workers’ compensation insurance.
- Construction Contractors on Public Projects: Any contractor or subcontractor working on government-funded building projects must have coverage.
Why Consider Workers’ Compensation?
Even though most private employers don’t have to provide it, workers’ compensation has an impact on:
- Protection Against Lawsuits: Keeps liability down and stops expensive settlements.
- Coverage for Workplace Injuries: Pays for medical bills and lost wages and helps get employees back to work.
- Peace of Mind: It makes employees trust you more and helps you follow the rules in your industry.
The Non-Subscriber System in Texas
Companies that opt out of workers’ compensation get labeled as non-subscribers. This choice offers employers some leeway, but it has big downsides:
- Legal Risks: Non-subscribers face full responsibility for job-related injuries and might end up in expensive court battles.
- Unlimited Damages: Unlike those with coverage, non-subscribers can’t put a ceiling on what they owe in worker injury claims.
- Missed Business: Many customers and partners demand proof of workers’ comp in dangerous fields like buildings.
Non-subscribers also have to follow certain rules about reporting, such as:
- Telling the Texas Division of Workers’ Compensation (DWC) every year that they don’t have coverage.
- Letting workers know in writing that they don’t have workers’ compensation insurance.
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Texas Workers’ Compensation Rates
Several factors affect workers’ compensation rates in Texas. These factors help insurance companies evaluate the risks of covering your business. Let’s look at how companies calculate these rates and what different industries can expect:
How Do Companies Calculate Workers’ Compensation Rates?
- NCCI Classification Codes:
- The National Council on Compensation Insurance (NCCI) assigns each job type a classification code based on its riskiness.
- Construction, oil, and gas jobs cost more than healthcare or office work because they are more dangerous.
- Payroll Size:
- You figure out workers’ compensation premiums for every $100 of payroll. Companies that pay more money to employees end up with bigger premiums.
- Experience Modifier Rate (EMR):
- This number changes your premium depending on how many claims your business has had in the past.
- Fewer claims lead to a lower EMR resulting in lower premiums. On the flip side, more claims cause a higher EMR, which drives up costs.
How to Cut Down on Workers’ Comp Costs
- Boost Workplace Safety: Cut down on accidents by rolling out safety training programs.
- Handle Claims Well: Take care of workplace injuries right away to steer clear of needless claims or higher EMRs.
- Right Classification: Make sure workers are put in the correct NCCI code groups to avoid paying too much.
Sample Rates for Common Texas Industries
Here’s a rundown of typical workers’ comp rates per $100 of payroll for various industries in Texas:
- Construction:
- $5.00–$15.00 Jobs like roofing and electrical work are at the top of this range because they’re riskier.
- Oil and Gas:
- $8.00–$20.00 Drilling and getting oil out of the ground are dangerous, so insurance costs more.
- Healthcare:
- $1.50–$4.00 Doctor’s offices and hospitals face less danger, but workers might hurt themselves doing the same tasks over and over.
- Retail:
- $0.75–$2.50 This covers stores where workers might get hurt doing physical work or dealing with customers.
- Clerical:
- $0.10–$0.50 Jobs in offices have the lowest risk rates because they involve few physical dangers.
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Texas Workers’ Compensation Exemptions
Texas is unique because it doesn’t require most private employers to carry workers’ compensation insurance.
However, there are specific exemptions and special considerations under the state’s workers’ comp system. Here’s a breakdown:
Who Is Exempt from Workers’ Compensation in Texas?
| Who Is Exempt | Description |
|---|---|
| Private Employers | Texas does not mandate private employers to carry workers’ comp, but non-subscribers face full liability for injuries. |
| Small Employers | Businesses with fewer than five employees are often exempt but may vary based on industry risks. |
| Independent Contractors | Not covered under workers’ comp but can opt for occupational accident insurance. |
| Domestic Workers | Nannies, housekeepers, and other household employees are exempt. |
| Farm and Ranch Laborers | Farmhands and ranch workers are exempt unless covered by their employer. |
| Volunteers and Charitable Organizations | Volunteers and some employees of charitable organizations may be excluded from workers’ comp. |
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Frequently Asked Questions
The following are common questions about Workers’ Compensation Insurance in Texas.
No, private employers are not required to carry workers' comp, but public employers and contractors on government projects must.
Non-subscribers face full liability for workplace injuries, including potential lawsuits with no caps on damages.
Exemptions include small businesses with fewer than five employees, independent contractors, domestic workers, and farm laborers.
Costs vary by industry, with rates calculated per $100 of payroll. For example, construction rates range from $5.00 to $15.00.
It covers medical expenses, wage replacement, rehabilitation, and, in fatal cases, death benefits for families.
Non-subscribers must report their status to the Texas DWC and face significant financial risks for workplace injuries.
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