Here's something that catches most new Texas business owners off guard: the state doesn't require you to carry workers' compensation insurance. Sounds great, right? Not so fast. Texas is the only state with this rule, and there's a catch—if you don't have coverage and an employee gets hurt, they can sue you directly for unlimited damages. No caps, no limits. That $1.20 per $100 of payroll you'd spend on workers' comp suddenly looks like a bargain compared to a six-figure lawsuit.
Texas is experiencing unprecedented business growth. The state led the nation with $282.5 billion in construction revenue in 2024, and the oil and gas industry continues to drive economic expansion across the state. Whether you're running a one-person consulting firm in Austin or managing a 50-person construction crew in Houston, understanding Texas business insurance requirements isn't optional—it's essential to protecting everything you've built.
What Business Insurance Is Actually Required in Texas?
The short answer: not much, at least from the state's perspective. Texas takes a hands-off approach to most business insurance requirements. But here's what you absolutely must have:
Commercial auto insurance is mandatory if you own any business vehicles. We're talking about the 30/60/25 split: $30,000 for bodily injury per person, $60,000 total per accident, and $25,000 for property damage. These are minimums, and honestly, they're pretty low. If your delivery driver causes a serious accident, those limits won't come close to covering the damages. Most business owners opt for higher coverage—$100,000/$300,000 or more—to avoid paying out of pocket.
If you're contracting with government entities—city, county, state, or federal—you'll need workers' compensation coverage for employees working on those projects. No exceptions. Same goes if you're a public employer. Beyond that, the state won't force you to buy insurance, but that doesn't mean you shouldn't.
The Workers' Comp Dilemma Every Texas Employer Faces
Let's talk about the elephant in the room. In 2024, the Bureau of Labor Statistics reported 156,000 non-fatal workplace injuries in Texas's private sector, with construction and manufacturing accounting for 42% of those cases. If you're one of the employers who chooses not to carry workers' compensation—what Texas calls being a "non-subscriber"—you're gambling that none of your employees will get hurt on the job.
Here's what that gamble means: you lose the legal protections that workers' comp provides. Normally, workers' comp is your employee's only remedy—they get their medical bills and lost wages covered, and in exchange, they can't sue you. Without it, an injured employee can file a personal injury lawsuit against you for negligence. They can claim pain and suffering. There are no caps on damages. One back injury at a construction site could bankrupt your business.
Even if you choose not to subscribe to workers' comp, you still have obligations. You must file an annual notice with the Texas Division of Workers' Compensation, post notices in your workplace, and inform new hires in writing that they're not covered. And you're still responsible for taking care of injured employees—you just don't have the lawsuit protection that comes with coverage.
For most businesses, especially those in high-risk industries like construction, oil and gas, or manufacturing, workers' comp is simply essential. At an average cost of $1.20 per $100 of payroll in 2024, it's a small price to pay for protection against unlimited liability.
Insurance for Texas's Booming Industries
If you're in construction or oil and gas—two of Texas's economic powerhouses—your insurance needs go way beyond the basics. The state's construction boom shows no signs of slowing, with over $1.2 billion in new retail and housing projects underway in 2025. Developers in major Texas metros are on track to deliver 1.24 million square feet of new retail space this year alone, more than double what was added in 2024.
For construction companies, builders risk insurance is critical. This coverage protects unfinished structures and materials during construction. In Texas, it typically costs 1–3% of the project's total value. For a $1 million project, you're looking at $10,000 to $30,000 annually. Given that Texas ranks among the top states for natural disasters—with over 100 tornadoes and multiple hurricanes annually—this protection is non-negotiable. In 2024 alone, storms caused $10 billion in property damage statewide.
Oil and gas operations face unique exposures that demand specialized coverage. Before the Texas Railroad Commission grants or renews a license, you must prove you have at least $300,000 in completed operations or products liability insurance. Environmental coverage is essential for incidents like oil spills. Control of well insurance covers blowout costs—something that can run into the millions. And if you're operating registered units, you need motor vehicle insurance that goes beyond standard commercial auto coverage.
Both industries share a common challenge: finding coverage that complies with Texas-specific regulations for environmental protection and worker safety. This isn't something you can handle with a basic business owner's policy. You need specialized coverage from insurers who understand the risks specific to Texas operations.
The Coverage You'll Actually Need to Do Business
Even though Texas doesn't require most business insurance, you'll quickly find that everyone you want to do business with does. About 70% of Texas small businesses carry general liability insurance, and there's a good reason for that. Try signing a commercial lease without it—your landlord will require proof of coverage. Want to land a contract with a larger company? They'll demand a certificate of insurance showing at least $1 million in general liability coverage.
General liability insurance covers the basics: someone slips and falls at your business, you accidentally damage a client's property, or your product causes an injury. At an average of $42 per month for Texas small businesses in 2024, it's affordable protection against claims that could otherwise put you out of business. The average legal cost per claim in Texas is $15,000, and that's before you factor in potential damages.
Commercial property insurance is another must-have, especially in Texas. In 2024, businesses here incurred $2.7 billion in property damage from severe weather. Business interruption coverage goes hand-in-hand with property insurance—Texas businesses lost $1.2 billion due to business interruption from severe weather that same year. If a tornado tears the roof off your warehouse or a hurricane forces you to close for weeks, this coverage pays your ongoing expenses and lost revenue while you recover.
Cyber liability insurance is increasingly essential. Texas businesses reported a 15% increase in cyber incidents in 2024. If you store customer data, process credit cards, or rely on computer systems to operate, a data breach could cost you hundreds of thousands in notification costs, credit monitoring services, legal fees, and regulatory fines. Texas data breach laws require businesses to report security breaches to affected residents, adding to the potential costs.
Getting Your Coverage Right
The biggest mistake Texas business owners make is either skipping insurance entirely because it's not required, or buying the cheapest policy they can find without understanding what it actually covers. Your insurance needs depend on your specific business—a software consultant working from home has different risks than a roofing contractor or an oilfield services company.
Start by assessing your actual risks. What's the worst that could happen to your business? An employee injury? A customer lawsuit? A fire that destroys your inventory? Then match coverage to those risks. Many small businesses find that a business owner's policy (BOP) bundles general liability and property coverage for $100 to $250 per month, providing solid protection at a reasonable cost.
Don't forget to review your coverage annually. As your business grows, your risks change. That $1 million liability policy that seemed adequate when you started might not be enough now that you're landing bigger contracts and hiring more employees. The few hundred dollars extra you'll spend on higher limits is nothing compared to what you'd pay out of pocket if you're underinsured.
Running a business in Texas gives you incredible opportunities, but it also comes with real risks. The state's hands-off approach to insurance requirements might seem like freedom, but it's really a responsibility. You're the one who has to protect your business, your employees, and everything you've worked to build. Get the coverage right, and you can focus on growing your business instead of worrying about what happens if something goes wrong.
