In Texas, few employers are required to carry workers’ compensation insurance, despite the fact that nearly all other states do. However, if you do business there, you might still want to think about getting coverage to protect your employees and your business.
In this guide, we’ll discuss what a workers’ compensation policy covers, how it helps both employers and employees, and how you can set up an insurance policy for your business.
Why is having workers’ compensation insurance something Texas employers should consider?
If an employee is injured or becomes ill on the job (and is unable to work for an extended period), workers’ compensation insurance can provide the funds for medical treatment, and even partial wages while they recover. Additionally, this type of insurance also protects employers from litigation related to workplace injuries. Employees who are covered by workers’ compensation are usually unable to sue their employers for damages related to their injuries or occupational illnesses.
For employers that offer coverage to employees, here are the most common benefits they will have access to, per the Texas Department of Insurance.
With the exception of impairment income benefits, these options can replace some of the employee’s wage losses due to a work-related injury or illness. Types of income benefits can include:
- Temporary income benefits (TIBs)
- Impairment income benefits (IIBs)
- Supplemental income benefits (SIBs)
- Lifetime income benefits (LIBs)
This can cover reasonable and necessary medical care for an employee who has been injured or ill at work.
Burial benefits can reimburse some of an employee’s funeral expenses to the person who paid those expenses.
This can help surviving spouses and family members replace some of the lost income when an employee dies due to a work-related injury or illness. Spouses of first responders can receive lifetime death benefits even if they remarry (for marriages on or after September 1, 2017).
Now that we better understand why a company might purchase workers’ compensation insurance coverage, let’s find out if there are requirements for those doing business in Texas.
What are the workers’ compensation insurance requirements in Texas?
In many cases by law, private employers are not required to have a policy, though some consider carrying coverage because it can offer protection from potential lawsuits in the event that an employee is injured while on the job. Simply put, only businesses in Texas that contract with government entities are required to buy coverage, which is used to safeguard workers on state-related projects.
- Post a written notice at their workplace in English, Spanish, and any other language that is appropriate
- Place the notice where employees can regularly see it
- Write the notice in the format adopted by DWC (Notice 6)
- Provide new employees with a written notice of non-coverage
For companies that are interested in obtaining a policy, let’s find out how they can go about purchasing one.
Buying workers’ compensation coverage in Texas
For companies that want to carry coverage, there are different options.
Employers should only purchase workers’ compensation insurance from companies licensed by the Texas Department of Insurance. According to the state agency, if you purchase a policy from a company that isn’t licensed, it will not be considered as valid coverage under state law.
In some cases, private employers are able to self-insure workers’ compensation claims. For companies that self-insure, they are required to pay the cost of the employee claims themselves, must get approval from DWC, and meet the financial requirements.
Additionally, some companies may join a self-insurance group. The group must get approval from the Texas Department of Insurance. The group members must be in the same or similar business and meet other requirements.
Are there penalties for not having coverage in Texas?
Though Texas does not issue penalties for private companies without workers’ compensation coverage, per the employer’s rights and responsibilities, all businesses must provide a safe workplace and take all reasonable steps to protect their employees. Even if the business purchases insurance, but does not comply with its requirements, there are administrative penalties that can be imposed.
Workers’ compensation insurance is worth thinking about
Even though Texas does not require employers to carry workers’ compensation insurance coverage, it can make business and financial sense to consider it. For employees, it provides peace of mind that they will have some income or medical costs covered should they experience a work-related injury and need to miss time away from their job. In addition, having insurance can financially protect your business from potential litigation should an employee experience a work-related injury or occupational illness. If you have any questions about purchasing workers’ compensation insurance, our team can assist you.
Please note all material in this article is for educational purposes only and does not constitute tax, benefits or legal advice. You should always contact a qualified tax, legal or financial professional, in your area for comprehensive tax or legal advice.