Opening a restaurant in Texas? You're probably expecting a long list of insurance requirements to check off before you can open your doors. Here's the surprising truth: Texas is actually one of the most lenient states when it comes to mandatory business insurance. But before you celebrate those potential savings, you need to understand what "optional" really means—and what it could cost you if something goes wrong.
The restaurant industry is one of the riskiest businesses to insure. Kitchen fires, slip-and-fall accidents, foodborne illness claims, employee injuries—the list goes on. So while Texas law might not force you to buy certain coverage, your landlord, bank, vendors, and basic business sense probably will. Let's break down exactly what you need to know about insurance requirements for running a restaurant in the Lone Star State.
Workers' Compensation: Optional But Critical
Here's where Texas is different from almost every other state: workers' compensation insurance is not required for private employers. That's right—you can have 50 employees working in your kitchen and dining room, and technically you're not breaking any laws by skipping workers' comp coverage.
But hold on. If you choose to operate as a "non-subscriber" (Texas-speak for not carrying workers' comp), you must file DWC Form-005 with the Texas Division of Workers' Compensation every single year between February 1 and April 30. This form confirms your non-subscriber status and requires you to report all workplace injuries and illnesses. Miss this filing and you could face penalties.
More importantly, here's what you lose by going without workers' comp: legal protection. In Texas, businesses that carry workers' compensation insurance are shielded from most employee lawsuits related to workplace injuries. Without that coverage, an injured employee can sue you directly—and they can pursue damages for pain and suffering, not just medical bills and lost wages. One serious kitchen accident could put you out of business.
The typical cost for restaurant workers' comp in Texas runs about $22 per month per employee, or roughly $0.45 per $100 of payroll. For most restaurant owners, that's a small price to pay for protecting both your employees and your business from catastrophic injury claims.
General Liability Insurance: Not Required by Law, But Required by Reality
Texas doesn't mandate that restaurants carry general liability insurance. But try telling that to your landlord when you're signing a commercial lease, or to your bank when you're applying for a small business loan. In practice, general liability insurance is essentially required because everyone you do business with will demand it.
General liability covers the risks that keep restaurant owners up at night: a customer slips on a wet floor and breaks their hip, a food poisoning outbreak leads to multiple illness claims, or a waiter accidentally spills hot coffee on a guest's expensive laptop. This coverage handles bodily injury, property damage, and personal injury claims from third parties—basically anyone who isn't your employee.
Most commercial leases and business contracts require minimum coverage of $1 million per occurrence. Government contracts in Texas specifically mandate this $1 million threshold. The good news? General liability for restaurants typically costs between $500 and $1,500 annually, or about $42 per month. Given that a single slip-and-fall lawsuit could easily exceed $100,000, this is one of the smartest investments you can make.
Liquor Liability: Mandatory If You Serve Alcohol
If your restaurant serves beer, wine, or cocktails, you need liquor liability insurance—period. Texas law and the Texas Alcoholic Beverage Commission take this seriously. This specialized coverage protects you if an intoxicated customer causes harm to themselves or others after being served at your establishment.
Think about it: a patron has too many margaritas at your Tex-Mex restaurant, gets behind the wheel, and causes an accident. Under Texas dram shop laws, you could be held liable. Liquor liability insurance covers legal defense costs, settlements, and judgments related to alcohol-related incidents. Most general liability policies specifically exclude alcohol-related claims, so this is separate coverage you absolutely must have if you serve drinks.
Licensing and Health Department Requirements
While we're focused on insurance here, it's worth noting that Texas does have strict health and safety requirements that tie into your overall business operations. You'll need a food establishment permit from your local health department or the Texas Department of State Health Services. Permit fees range from $258 to $773 depending on your gross annual food sales volume.
Your employees need food handler certifications, and you'll need at least one certified food protection manager on staff. You'll also need a sales tax permit from the Texas Comptroller. While these aren't insurance requirements, they're part of the regulatory framework you must navigate. Many of these permits require inspections, and maintaining proper insurance coverage often makes those inspections go more smoothly.
Other Coverage to Consider
Beyond the basics, most Texas restaurant owners should consider a Business Owner's Policy (BOP), which bundles general liability with property coverage. The average BOP for restaurants costs about $73 per month and protects your building, equipment, and inventory from fire, theft, and other covered perils.
If you operate delivery vehicles, Texas requires commercial auto insurance with minimum coverage of $30,000 per person for bodily injury ($60,000 per accident) and $25,000 for property damage. You might also want to look into business interruption insurance, which covers lost income if you have to temporarily close due to a covered event like a fire or storm damage—particularly relevant in Texas given the risk of hurricanes along the coast and severe weather throughout the state.
Getting the Right Coverage for Your Restaurant
The fact that Texas doesn't mandate certain types of insurance might sound like a money-saving opportunity, but it's actually a responsibility. You need to make informed decisions about protecting your business, your employees, and your customers—because the law won't do it for you.
Start by getting quotes for general liability, workers' compensation, and liquor liability if applicable. Consider bundling these into a BOP for potential savings. Talk to an insurance agent who specializes in restaurant coverage—they'll help you understand your specific risks based on your concept, location, and size. Remember, the cheapest option upfront could end up being the most expensive choice if you face a major claim without adequate coverage. Protect your dream of running a Texas restaurant by making sure you're properly insured from day one.
