How Much Does Workers Compensation Insurance Cost in Texas?

Texas is the only state in the US that doesn't legally require most private employers to carry workers compensation insurance — but that doesn't mean you should go without it. If one of your employees is injured on the job and you're uninsured, your business could face a lawsuit that results in catastrophic financial loss.

This guide breaks down workers comp costs in Texas, what drives them, and what happens if you operate without coverage.

How Is Workers Compensation Insurance Priced in Texas?

Unlike most other states, Texas does not have a state-run workers compensation fund or regulated rate system. Pricing is set by the open market, which means costs vary between carriers — and shopping the market matters.

Texas workers comp premiums are calculated using this formula:

(Payroll ÷ 100) × Class Code Rate × Experience Modifier = Annual Premium

Each component breaks down as follows:

Payroll

Your total annual payroll is the base of your premium. Higher payroll = higher premium, because more employees = more exposure.

Classification Code (Class Code)

Every type of job has a classification code assigned by the National Council on Compensation Insurance (NCCI). Riskier jobs have higher rates. A roofing contractor has a much higher rate than an office administrator.

Experience Modifier (Ex-Mod)

Your claims history relative to similar businesses. A modifier of 1.0 is average. Below 1.0 means fewer claims than average (lower premium). Above 1.0 means more claims (higher premium). Keeping your claims low directly reduces your cost over time.

How Much Does Workers Comp Cost in Texas by Industry?

Here are approximate annual premiums per $100 of payroll for common Texas industries:

• Office / clerical workers: $0.20–$0.50 per $100 payroll
• Retail workers: $1.00–$2.00 per $100 payroll
• Restaurant / food service: $2.00–$4.00 per $100 payroll
• General contractors: $5.00–$10.00 per $100 payroll
• Roofing contractors: $15.00–$30.00+ per $100 payroll
• Electrical contractors: $4.00–$8.00 per $100 payroll
• Trucking / transportation: $6.00–$12.00 per $100 payroll

Example: A general contractor with $500,000 in payroll and a $7.00 rate would pay approximately $35,000/year before applying their experience modifier.

For most small Texas businesses with lower-risk employees, annual premiums typically range from $2,000 to $15,000 per year. See estimated ranges on our Texas insurance pricing page.

Is Workers Compensation Required in Texas?

Texas is the only state where most private employers can legally opt out of the workers compensation system. However, "non-subscribers" — businesses that don't carry workers comp — face serious consequences:

• You lose immunity from most workplace injury lawsuits
• Injured employees can sue you in civil court and claim that your negligence caused their injury
• You cannot use common law defenses like "the employee assumed the risk" or "a coworker caused the injury"
• A single serious injury judgment can be financially devastating

Additionally, if you work on government contracts or many private construction projects in Texas, workers comp is often contractually required even if not legally mandated.

What Does Workers Compensation Insurance Cover in Texas?

A Texas workers comp policy covers employees injured on the job for:

• Medical expenses: Doctor visits, hospital stays, surgery, physical therapy
• Lost wages: Income replacement while the employee is unable to work
• Disability benefits: Partial or total disability payments for longer-term injuries
• Death benefits: Payments to surviving family members in the event of a fatal workplace injury
• Employer liability: Covers lawsuits from employees who allege negligence caused their injury

What Does Workers Compensation NOT Cover?

• Injuries that occur outside of work duties
• Intentional self-inflicted injuries
• Injuries sustained while the employee was intoxicated or under the influence
• Independent contractors (generally — classification matters)
• Damage to business property

Can Independent Contractors in Texas Be Covered by Workers Comp?

This is an important question for Texas contractors and businesses that use subcontractors. Generally, true independent contractors are not covered under your workers comp policy — they're responsible for their own coverage.

However, if a worker is misclassified as a contractor when they're actually an employee, your business can be held liable for their injuries. The Texas Department of Insurance uses specific criteria to determine worker classification. When in doubt, talk to your insurance broker before making classification decisions.

How Can Texas Businesses Lower Their Workers Comp Premium?

• Implement a formal safety program — written safety protocols reduce accidents and lower your experience modifier over time
• Return-to-work programs — getting injured employees back to modified duty faster reduces claim costs
• Accurate payroll classification — misclassifying employees into higher-risk codes inflates your premium unnecessarily
• Shop the market annually — rates vary significantly between carriers; an independent broker can compare them for you
• Review your experience modifier — if your ex-mod is above 1.0, understand why and work to reduce claims

Do I Need Workers Comp If I'm a Sole Proprietor in Texas?

If you work alone with no employees, you're not required to carry workers comp for yourself. However, if you're injured on a job site and have no coverage, you'll pay all medical expenses and lost income out of pocket. Some sole proprietors choose to carry an individual workers comp policy or rely on health insurance — but health insurance often excludes work-related injuries.

If you're a sole proprietor working on jobs that require proof of workers comp, you may need to purchase a policy just to meet contract requirements. Talk to an agent about your options.

Get a Texas Workers Compensation Quote

As an independent Houston insurance broker, TWFG Elkhalil Insurance works with multiple carriers to find competitive workers comp rates for Texas businesses of all sizes and industries — from single-employee shops to companies with large crews.

Get a workers compensation quote today — we respond within 24 hours.

Related reading: Workers Compensation Insurance Texas | Contractors Insurance Texas | General Liability Insurance | Business Owners Policy (BOP) | Texas Insurance FAQs