Texas small business insurance requirements: optional workers' compensation, non-subscriber duties and auto minimums

Texas: what the state requires of a small business

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Texas is the only state where most private employers may choose not to carry workers' compensation. Employers who opt out (non-subscribers) must notify the Division of Workers' Compensation and their employees, lose common-law defenses in injury lawsuits, and are often required to carry coverage anyway by government and construction contracts. Vehicles must carry at least 30/60/25 liability. Liquor licensees face Dram Shop liability under the Alcoholic Beverage Code.

Reviewed by CoverMatch licensed agents, Licensed property & casualty agents · Reviewed Oct 11, 2026 Updated Oct 30, 2026

Texas rules with sources
Topic	The rule in Texas	Source
Workers' compensation — optional for most private employers	Private employers may elect whether to carry workers' compensation; public employers, and private employers under contracts with governmental entities, must carry it. Building and construction contractors working for government entities must cover their employees.	Texas Labor Code §§ 406.002, 406.096; Texas Department of Insurance, Division of Workers' Compensation
Non-subscriber duties	Employers that do not carry coverage must file an annual notice of non-coverage with the Division (DWC Form-005), post and give written notice to employees, and report work-related injuries and illnesses; they cannot use the common-law defenses of contributory negligence, assumption of risk or fellow-servant negligence in an employee's lawsuit.	Texas Labor Code §§ 406.004, 406.005, 406.033 and 411.032
Auto liability minimums	Bodily injury $30,000 per person / $60,000 per accident and property damage $25,000 for vehicles operated in Texas; commercial vehicles above certain weights and for-hire vehicles must carry higher limits.	Texas Transportation Code § 601.072; Texas Department of Insurance
Liquor licensees	No statutory insurance minimum for a Texas Alcoholic Beverage Commission permit, but a licensee that serves an obviously intoxicated person is liable for resulting injuries under the Dram Shop Act, which liquor liability insurance answers; some local jurisdictions and landlords require proof.	Texas Alcoholic Beverage Code § 2.02
Contractors	Texas does not license general contractors statewide; electricians, plumbers and HVAC contractors are licensed by state agencies with their own insurance requirements, and cities set their own registration and insurance rules for other trades.	Texas Department of Licensing and Regulation

Topic

The rule in Texas

Source

Workers' compensation — optional for most private employers

Private employers may elect whether to carry workers' compensation; public employers, and private employers under contracts with governmental entities, must carry it. Building and construction contractors working for government entities must cover their employees.

Texas Labor Code §§ 406.002, 406.096; Texas Department of Insurance, Division of Workers' Compensation

Non-subscriber duties

Employers that do not carry coverage must file an annual notice of non-coverage with the Division (DWC Form-005), post and give written notice to employees, and report work-related injuries and illnesses; they cannot use the common-law defenses of contributory negligence, assumption of risk or fellow-servant negligence in an employee's lawsuit.

Texas Labor Code §§ 406.004, 406.005, 406.033 and 411.032

Auto liability minimums

Bodily injury $30,000 per person / $60,000 per accident and property damage $25,000 for vehicles operated in Texas; commercial vehicles above certain weights and for-hire vehicles must carry higher limits.

Texas Transportation Code § 601.072; Texas Department of Insurance

Liquor licensees

No statutory insurance minimum for a Texas Alcoholic Beverage Commission permit, but a licensee that serves an obviously intoxicated person is liable for resulting injuries under the Dram Shop Act, which liquor liability insurance answers; some local jurisdictions and landlords require proof.

Texas Alcoholic Beverage Code § 2.02

Contractors

Texas does not license general contractors statewide; electricians, plumbers and HVAC contractors are licensed by state agencies with their own insurance requirements, and cities set their own registration and insurance rules for other trades.

Texas Department of Licensing and Regulation

Workers' compensation in Texas

Texas stands alone in making workers' compensation optional for most private employers. Choosing not to subscribe comes with duties — annual notice to the Division, notices to employees, injury reporting — and with the loss of the common-law defenses an employer would otherwise raise when an injured worker sues. Government contracts and most general contractors require coverage, so the choice is narrower in practice than in law.

Auto liability in Texas

The 30/60/25 minimums apply to vehicles operated in Texas. Business vehicles carry more because platforms, clients and lenders require it; commercial policies are rated by vehicle type, radius and driver and are usually written with a combined single limit.

Licensing and permits in Texas

Texas licenses electricians, plumbers and HVAC contractors at the state level, each with insurance conditions, and leaves general contractor rules to cities. Alcoholic beverage permits carry Dram Shop exposure rather than a statutory insurance minimum.

How CoverMatch uses these rules

A Texas business in the wallet is shown the subscriber choice plainly, with the duties of non-subscription, once employees are reported; auto limits are checked on scheduled vehicles; and trade licensing conditions are matched against the business class. Each rule links to its source, and a licensed agent reviews this page before publication and when the rules change.

Sources

Questions people actually ask

If workers' compensation is optional in Texas, why do most businesses carry it?

Because general contractors, government contracts and many clients require it, because non-subscribers lose their legal defenses in employee injury suits, and because the policy is usually cheaper than the exposure.

What is a Texas non-subscriber?

An employer that has chosen not to carry workers' compensation. It must notify the Division and its employees each year and report injuries, and it faces lawsuits without the usual defenses; many carry an occupational accident policy instead, which is not the same thing.

Do Texas auto minimums apply to my business trucks?

The 30/60/25 minimums apply to vehicles generally; heavier commercial vehicles and for-hire operations carry higher state or federal minimums, and contracts usually require a combined single limit well above them.

By business type in Texas