If you operate a business in Texas—whether you’re launching a startup in Austin or managing a restaurant in Houston—you face a unique insurance landscape.Texas is the only state among all 50 states that doesn’t mandate most private employers to carry workers’ compensation. While that offers flexibility, it also increases your liability exposure if you’re not properly insured.
This guide breaks down Texas’s commercial insurance requirements, must-have coverages, and considerations for 2025.
Who Needs Small Business Insurance in Texas?
While not all insurance is legally required, skipping protection comes with serious risk.
What’s Mandatory:
Commercial Auto Insurance: Any vehicle owned by your business must be insured. Policies must meet or exceed these state minimums: Liability: $30,000 per person / $60,000 per accident for bodily injury and $25,000 for property damage (30/60/25).
Personal Injury Protection (PIP): Personal Injury Protection (PIP): Required by law for all liability policies, but you can sign a waiver to decline this coverage.
Contractor and License-Specific Requirements: Certain professions have state-mandated insurance rules. For example, Responsible Master Plumbers must carry at least $300,000 in commercial general liability insurance under Texas Occupations Code Section 1301.552.
Workers’ Compensation (Optional but Critical): Texas does not require it for most private employers. However, if you opt out (become a “non-subscriber”), you lose legal protections against employee lawsuits and key legal defenses such as assumption of risk and contributory negligence. Many government and private contracts also require you to carry it.
Key Coverages Texas Business Owners Should Consider
General Liability Insurance: Covers third-party injuries, property damage, and advertising injury. It is essential for storefronts and contractors.
Business Owner’s Policy (BOP): Combines general liability with property coverage. Standard BOPs exclude flood damage, which requires a separate policy.
Workers’ Compensation: Though optional, this coverage protects your team and shields you from lawsuits. The cost is calculated as a rate per payroll based on employee job classifications.
Professional Liability (E&O): Necessary for consultants, real estate professionals, and accountants to protect against lawsuits from errors or client dissatisfaction.
Cyber Insurance: Covers breach notification costs, recovery services, and legal defense. It is important for any business that stores client data.
Discover cost-saving strategies in our guide: Local Business Insurance Solutions to Save You Money.
Real Claims and Risk Examples Across Texas
Retail Stores: Slip-and-fall injuries from wet floors in Dallas. These incidents can result in significant liability claims.
Restaurants: Kitchen fires in San Antonio causing equipment loss. Covered under a property policy, but spoilage requires a specific endorsement.
Contractors: A subcontractor falls from scaffolding in Houston. Without workers’ comp, the general contractor could face full financial responsibility.
Tech Startups: A cyberattack on a payment system leaks customer data. Cyber coverage pays for breach notifications and legal fees.
Cost of Commercial Insurance in Texas
Your insurance cost depends on multiple factors including:
- Business size and payroll
- Industry classification (construction carries higher risk)
- Claims history and safety record
- Location (Gulf Coast areas face higher property rates due to weather exposure)
- Coverage limits selected
- Type of business operations
These factors collectively determine your premium rather than any single standardized rate structure.
What Happens If You Don't Carry Proper Coverage?
No Commercial Auto: Can lead to suspended registrations, license penalties, and fines.
No Workers’ Comp (When Required by Contract): Can result in contract termination and full liability for medical bills and lawsuits from injured employees.
Missing General Liability: Many commercial landlords won’t lease space, and you could be denied certain local permits or professional licenses, depending on municipal requirements.
Bottom Line: Don't Let Flexibility Cost You Everything
Texas may not require workers’ comp for private businesses, but skipping essential insurance can still shut you down.
Here’s what to do next:
- Review your business type, contracts, and local regulations
- Secure a separate flood policy if you are in a flood-prone area
- Don’t risk being underinsured—especially in high-risk industries
Need help? Call 855-718-7552
