Texas Workers' Compensation Insurance

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Texas is the only state in the U.S. that doesn't require most businesses to purchase workers' comp. Does that mean you should ignore this type of insurance if you live in the Lone Star State? 

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Even if it's not required, workers' comp is important for two reasons: it protects your employees from having to pay for work-related injuries themselves, and it protects your business from getting sued.

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Small businesses may want to work with a company like Hourly, which offers pay-as-you-go pricing and calculates premiums based on your actual payroll, not your estimated payroll. This means you only pay for what you need, and you don't get slammed with heavy audit fees at the end of the year.

How Does Workers' Comp Work in Texas?

Business owners in Texas are only required to purchase workers' comp insurance if they contract with the government, in which case they'll need to insure the employees working on those projects. 

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Contractors in Texas can also require their subcontractors to purchase comp, but for most other businesses, it's not a requirement.

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Texas workers' comp is designed to:

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• Pay for an injured employee's medical care if they get into an accident or become ill because of a workplace situation
• Replace part of the injured worker's income if they can't work due to their illness or injury
• Pay death benefits if a worker is killed while on the job
• Protect employers from the consequences of potentially disastrous lawsuits filed by injured workers

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That's a tall order, but workers' comp is overseen by the Texas Department of Insurance (TDI) Division of Workers' Compensation (DWC). 

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The state of Texas has laws and rulings in place to ensure that every job-related injury or illness is handled fairly for the worker, the employer, and the insurance company. 

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Workers' compensation state law is codified in the Texas Workers Compensation Act, which is part of the Texas labor code.

Why Do I Need Workers' Comp?

If it's not required, you may wonder why you need workers' comp. Not only does it help you support your employees in the worst-case scenario, but it's also an effective way to protect your business from lawsuits. 

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If one of your employees gets injured or becomes ill because of workplace conditions, they can potentially sue you—unless you have workers' comp. 

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Carrying this insurance gives you a defense against workers who may claim that they were injured through your negligence, and it means that if they voluntarily take a risk at work, you likely won't be held responsible for the outcome. Under Texas law, as long as your employees have accepted your workers' compensation policy, they generally can't sue you.

Texas Workers' Compensation Benefits

When your employee sustains an on-the-job injury or becomes ill from workplace conditions, your insurance carrier will provide money to cover things like:

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• Medical benefits, including the cost of hospital stays, prescriptions, and physical therapy
• Income benefits, including lost wages if the employee has to take time off, and disability benefits if they are temporarily or permanently impaired. These are determined based on the worker's average weekly wage for the 13 weeks before their accident.
• Death benefits if an employee dies on the job or after suffering a workplace injury. These are paid to their dependents and equal 75% of the worker's lost wages, plus up to $10,000 in funeral costs.

What Does Texas Workers' Comp Not Cover?

Texas workers' comp covers just about any and every accident that could happen at work, including falls, cuts, burns, exposure to harmful chemicals, and more. But what does this insurance policy not cover?

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For one thing, it applies solely to work-related accidents and conditions. While an employee could apply for benefits if they develop carpal tunnel from years of working on an assembly line, they can't use it to cover personal medical costs not related to their job.

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There are other circumstances in which a worker couldn't apply for workers' compensation coverage, including:

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• If the accident was the result of horseplay or physical fighting on the part of the employee
• If the injury happened during an act of criminal activity or self-injury
• If the employee was intoxicated or high on drugs at the time of the accident
• If the accident happened during the employee's voluntary participation in an off-duty recreational activity sponsored by their employer, such as a softball game
• If the accident was part of a third party's criminal act that was directed against the employee for a personal reason unrelated to work
• If the accident was caused by an "act of God" (an unpreventable accident or natural event not caused by human intervention, such as a naturally occurring fire or storm)

FAQs About Texas Workers' Compensation Insurance

How much does workers' comp cost in Texas?

When it comes to cost, your insurer will consider things like your number of employees and the type of work they perform. Larger companies will probably pay more since they have a larger payroll, as will those with a higher risk of injury, such as construction or forestry.

How much does workers' comp pay in Texas?

An employee can receive anywhere from $167 to $1,112 per week on workers' comp in Texas. The exact amount depends on the extent of their injuries. 

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There are five categories of income benefits, including death benefits, already covered above:

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• Temporary income benefits (TIB): These kick in when the worker has lost income due to being absent from work for more than seven days because of the injury. The insurer will pay 70 to 75 percent of the employee's wages in this case (up to the state max of $1,112). This benefit ends when the employee returns to work, and their pay equals what it was before the injury or, alternatively, what it is on the day the worker reaches their maximum medical improvement. This term, often called MMI, is the date at which the doctor believes that no further healing or recovery can be expected.
• Impairment income benefits (IIB): These occur once the employee has reached MMI and their personal injury is considered permanent. It equals 70 percent of the worker's wages (up to the state max of $1,112). The benefit is not contingent on the employee's ability to work; it merely states that there are permanent consequences of the injury or illness that render them unable to do the job they did prior to the accident.
• Supplemental income benefits (SIB): These are paid to workers whose injuries are serious enough that they are unable to return to work or have returned but are earning less because of the injury. Their doctor will assign an impairment rating to them, which must be 15 percent or more to qualify for this benefit.
• Lifetime income benefits (LIB): These benefits are paid out when the worker sustains a serious injury that means they are unable to work. This might include things like blindness or a traumatic brain injury. This benefit gives them 75 percent of their average wage plus a 3 percent cost-of-living increase every year. It has no time limit and may be paid until the employee's death.

How long does an employer have to file a workers' comp claim in Texas?

Texas employers should notify their insurer within eight days of learning of the injury. According to Texas workers' compensation law, an employee has 30 days to give notice of a work-related injury or illness to their employer. 

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Both employers and employees have one year to file a formal workers' compensation claim with the state using DWC Form 041. After that, the statute of limitations runs out.

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Of course, the first thing an employer and employee should do after an accident or injury is obtain any needed medical treatment for the injured worker. 

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In some cases, the worker may be able to go to their personal care physician (PCP) for treatment, but in other cases, their employer may be part of a healthcare network, in which case the employee will need to be seen by healthcare providers within that network if they want their medical bills to be covered. 

Who do I contact to purchase Texas workers' comp?

The easiest way to provide insurance coverage for your employees is to talk to your insurance broker. They can answer any questions you may have and get you set up with a policy customized for your particular needs. Be sure to only purchase from companies licensed by the Texas Department of Insurance.

How do I contact the Texas Division of Workers' Compensation?

You can contact the Texas Department of Insurance's Division of Workers' Compensation (DWI) by visiting their website or calling 800-252-7031, option 1.

What happens if I don't have workers' comp and an employee gets injured?

If one of your employees gets injured and can prove that your company is at least 1% at fault, they may be able to sue you in order to recover money for lost wages, past and future medical costs, and payment for pain and suffering. 

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Companies that don't carry policies are called non-subscribers. As a nonsubscriber, you're required to inform all your employees that they are not covered by any workers' compensation system. 

Protect Your Employees and Your Business

For most small businesses, a single lawsuit can be devastating and final. If you don't have a policy, consider talking to your insurance agent about finding one and getting started with Hourly. We make workers' comp easier, more affordable, and simply better for everyone. Get a free consultation today.