If you're running an IT or technology services business in Texas, you've probably noticed something curious: the state has a reputation for being business-friendly, and part of that means fewer mandatory insurance requirements than most other states. But here's the catch—just because Texas doesn't legally require certain coverage doesn't mean you can operate without it. Your clients, landlords, and contracts will demand proof of insurance before you can even get started.
Whether you're a solo web developer working from home, a managed IT services provider with a team of technicians, or a cybersecurity consulting firm, understanding Texas insurance requirements will save you from expensive mistakes and help you win more contracts. Let's break down exactly what you need to know.
What Texas Actually Requires (Spoiler: Not Much)
Texas takes a hands-off approach to business insurance regulation. Unlike states like California or New York that mandate specific coverage levels, Texas only requires insurance in very specific situations. For IT and tech services companies, here's what's actually mandatory under state law:
Commercial auto insurance is required if your business owns or operates vehicles. This means if you have company cars for your IT consultants making on-site visits, you need at least Texas's minimum auto liability limits of $30,000 per person, $60,000 per accident for bodily injury, and $25,000 for property damage. These are the same minimums as personal auto insurance.
Workers' compensation is where Texas gets interesting. Most private employers—including IT companies—are not required to carry workers' comp. Yes, you read that right. Texas is one of the only states where workers' comp is optional for most businesses. However, if you choose to go without coverage (called being a "non-subscriber"), you must file Form DWC005 annually with the Texas Department of Insurance, post notices in English and Spanish at your workplace, and report all workplace injuries. More importantly, you lose the legal protections that workers' comp provides, meaning injured employees can sue you directly for damages.
There's one major exception: if you contract with government entities, workers' comp becomes mandatory for employees working on those projects. So if you're bidding on state agency or municipal IT contracts, you'll need coverage regardless of your preferences.
What Your Clients Will Actually Require
Here's where the rubber meets the road. While Texas law might not mandate general liability or professional liability insurance, your clients absolutely will. Before signing any service agreement, expect your client to request a certificate of insurance (COI) proving you have adequate coverage.
The industry standard for general liability insurance in Texas is $1 million per occurrence and $2 million aggregate. According to insurance professionals in the state, this represents about 99% of all general liability policies sold to Texas businesses. If you work with enterprise clients, government agencies, or large organizations, they may require even higher limits—sometimes $2 million per occurrence or more.
General liability covers third-party bodily injury, property damage, and advertising injury claims. For IT businesses, this might include scenarios like accidentally damaging a client's server during installation, causing a slip-and-fall incident at a client's office, or facing a lawsuit over alleged copyright infringement in your marketing materials.
But general liability doesn't protect you from the biggest risks in tech services—that's where professional liability comes in.
Professional Liability and Errors & Omissions Insurance
Professional liability insurance—also called errors and omissions or E&O insurance—is the financial safety net that protects your business when a client claims your services caused them financial harm. For IT companies, this is absolutely critical coverage.
Think about the kinds of claims IT professionals face: a coding error that causes a client's e-commerce site to go down during Black Friday, missing a deadline that delays a product launch, failing to properly secure a database that leads to a breach, or giving advice about a software solution that doesn't perform as promised. These aren't covered by general liability—they're professional mistakes, and they can result in six- or seven-figure lawsuits.
E&O insurance covers legal defense costs, settlements, and judgments related to negligence, misrepresentation, inaccurate advice, and breach of contract claims. Most policies also cover court costs and attorney fees, which can add up quickly even if you ultimately win the case.
When shopping for E&O coverage, pay attention to whether the policy is "claims-made" or "occurrence-based." Claims-made policies only cover you if both the incident and the claim happen during your policy period. If a client sues you two years after your policy expires for work you did while covered, you're not protected unless you maintain continuous coverage or purchase tail coverage. Occurrence-based policies cover incidents that happen during the policy period regardless of when the claim is filed, but they're typically more expensive and harder to find for tech services.
Cyber Liability Insurance: The New Essential
If you handle client data, manage networks, or provide cloud services, cyber liability insurance has moved from "nice to have" to "must have" in Texas and everywhere else. This coverage protects your business from data breach costs, ransomware attacks, and cybersecurity incidents.
Many insurance providers now offer bundled tech E&O policies that combine professional liability and cyber coverage into one package. This makes sense because the risks often overlap—a failure to implement proper security measures (professional negligence) that leads to a data breach (cyber incident) could trigger both coverages.
Cyber policies typically cover breach notification costs, credit monitoring for affected individuals, forensic investigation expenses, legal fees, regulatory fines, and business interruption losses. Given that the average cost of a data breach continues to climb—reaching hundreds of thousands of dollars even for small incidents—this coverage can literally save your business.
Getting the Right Coverage for Your IT Business
Start by reviewing your existing client contracts and RFPs to understand what coverage limits they require. Share these contracts with an insurance agent early in the process so they can ensure your coverage meets all contractual obligations from day one. Many businesses make the mistake of buying insurance first and reading contracts later, only to discover their coverage falls short.
For most Texas IT businesses, a solid insurance package includes general liability ($1M/$2M limits), professional liability with appropriate limits based on project size and client requirements, cyber liability coverage, and if you have employees, workers' compensation. If you operate vehicles, add commercial auto. If you have expensive equipment or inventory, consider commercial property insurance.
The good news is that IT businesses generally enjoy lower insurance premiums compared to higher-risk industries like construction or manufacturing. Your claims history, revenue, number of employees, and specific services offered all affect your rates, but tech companies typically have favorable risk profiles from an insurance perspective.
Texas's light regulatory touch on business insurance gives you flexibility, but don't mistake that for permission to operate uninsured. The real requirements come from your clients, contracts, and common sense risk management. Build a strong insurance foundation, review your coverage annually as your business grows, and you'll be positioned to win contracts and sleep soundly knowing you're protected against the biggest risks in technology services.
