Starting and running a business in Texas comes with various responsibilities, including understanding whether business insurance is required. While some types of business insurance are legally mandated, others are optional but highly recommended to protect against financial risks.
Is Business Insurance Required by Law in Texas?
Unlike some states, Texas does not require most businesses to carry general business insurance. However, certain types of insurance may be required depending on the nature of the business and its workforce.
Workers' Compensation: Optional but Recommended
Texas is unique in that it doesn't require private employers to carry workers' compensation insurance. However, businesses that choose not to carry it may face legal risks. If an employee is injured on the job and the company lacks coverage, the employer could be sued for medical costs, lost wages, and damages. Certain government contractors and businesses in high-risk industries may be required to carry workers' compensation.
Commercial Auto Insurance: Mandatory for Business Vehicles
If a business owns and operates vehicles, commercial auto insurance is required under Texas law. The minimum liability coverage must meet the state's 30/60/25 rule, which includes:
- $30,000 for bodily injury per person
- $60,000 for bodily injury per accident
- $25,000 for property damage per accident
Businesses that rely on employee-owned vehicles for work purposes should consider hired and non-owned auto insurance (HNOA) to avoid coverage gaps.
Professional Liability Insurance for Certain Industries
Some industries require specific business insurance policies. For example, Texas may mandate professional liability insurance for healthcare providers, attorneys, and certain licensed professionals to protect against malpractice or negligence claims.
Recommended Business Insurance Policies in Texas
Even if insurance is not legally required, Texas businesses should consider policies that provide financial protection:
- General Liability Insurance – Covers third-party bodily injury, property damage, and legal claims.
- Commercial Property Insurance – Protects physical assets like office space, equipment, and inventory.
- Business Interruption Insurance – Helps cover lost income if the business is forced to close because of a disaster.
- Cyber Liability Insurance – Protects against data breaches and cyberattacks.
Conclusion
While Texas does not mandate business insurance for most industries, carrying the right coverage can prevent financial losses and legal issues. Business owners should assess their risks and consult an insurance professional to ensure they are fully protected.