Texas is the exception. It is generally the only state that does not require most private employers to carry workers' compensation insurance. Employers who go without it are called non-subscribers, and there are a lot of them.
That makes it a genuine business decision rather than a compliance checkbox — which is exactly why it deserves more thought than it usually gets.
What workers' comp does
It pays medical costs and a portion of lost wages when an employee is injured on the job, regardless of who was at fault. In exchange, the employee generally cannot sue the employer over the injury. That trade — no-fault benefits for the worker, lawsuit protection for the employer — is the entire structure of the system.
What you give up as a non-subscriber
Opting out does not simply mean saving the premium. It means giving up the employer-side half of that bargain, and the consequences are specific.
A non-subscribing employer sued by an injured employee loses the common-law defenses that would normally be available. In a typical negligence case, an employer could argue the employee was careless, that a coworker caused the injury, or that the employee knowingly accepted a known risk. A non-subscriber generally cannot raise those defenses. The employee has to prove employer negligence, and once they do, the employer has very little to stand behind.
There is also no cap. Workers' compensation benefits are set by a schedule. A negligence verdict is set by a jury, and can include pain and suffering and other damages that the comp system does not pay.
There are obligations even if you opt out
Non-subscribing is not the absence of paperwork. Employers who do not carry coverage have notice obligations to their employees and reporting obligations to the Texas Department of Insurance, Division of Workers' Compensation, including annual notice and reporting of certain workplace injuries. Failing to do that creates its own exposure entirely separate from any injury.
If you are going to be a non-subscriber, be a properly documented one. Confirm current requirements with the Division directly, because details change.
Some employers do not have a choice
The general rule has exceptions:
- Public employers are required to have coverage.
- Contractors on certain government projects are typically required to carry it.
- Private contracts frequently require it. General contractors, property managers, large customers and landlords routinely require a certificate showing workers' compensation before they will let you on site. This is the most common real-world reason small Texas businesses end up carrying it.
That last one matters more than most owners expect. You can be legally permitted to skip coverage and still be commercially unable to work without it.
What about occupational accident policies?
Many non-subscribers buy an occupational accident or alternative injury benefit plan. These pay medical and disability benefits for work injuries, often at lower cost than comp.
Understand clearly what they do not do: they generally do not restore your lawsuit protection. An employee can accept benefits under the plan and still sue you for negligence. Some plans include arbitration agreements or benefit-election structures intended to address that, and their enforceability depends heavily on how they are drafted and administered. If lawsuit exposure is your main concern, this is a conversation to have with an attorney, not just an insurance quote.
Contractors, subcontractors and the 1099 assumption
A frequent and expensive mistake: assuming that because someone is paid on a 1099, they are not your problem.
Whether a worker is genuinely an independent contractor depends on the actual working relationship — control over how the work is done, whose tools and materials are used, whether they work for others — not on the paperwork. If an injured worker is reclassified as an employee after the fact, a business that believed it had no employees discovers it had uninsured ones.
If you hire subcontractors, require certificates of insurance from every one of them and keep the certificates current. An uninsured sub's injury has a way of becoming your claim.
How to think about the decision
Consider subscribing if you have employees doing physical work, if customers or general contractors require it, if a single serious injury lawsuit would end your business, or if you want predictable costs rather than open-ended exposure.
Consider going without it if your work is genuinely low-risk, you have very few employees, no customer requires it, and you have looked honestly at what an uncapped negligence verdict would do to you — and made peace with it.
What you should not do is default into non-subscriber status because nobody brought it up. That is the version that goes wrong.
The rest of the picture
Workers' comp covers employee injuries and nothing else. It does not cover a customer injured on your premises, damage to your equipment, a lawsuit over your work product, or income lost while you are closed. Those are general liability, commercial property and business interruption, and they are separate decisions.