Texas Contractor Insurance

Workers' Compensation Is Optional Here, Which Is Not the Same as Free

Texas is the only state where private employers can decline workers' compensation. An employer who declines is a non-subscriber, and non-subscribing comes with obligations of its own.

• File DWC Form-005 with the Division of Workers' Compensation within 30 days of hiring a first employee, within 10 days of terminating coverage, and again every year between February 1 and April 30.
• Post the required notice to employees at each workplace and give written notice to each worker.
• Report covered injuries using DWC Form-007 where the rules require it.
• Understand that a non-subscriber gives up common law defenses in an employee injury suit, which is the part that costs real money.

Public work is different. Under Texas Labor Code section 406.096, a governmental entity entering a building or construction contract must require the contractor to certify in writing that it carries workers' compensation for each employee on the project, and subcontractors must supply the same certification up the chain.

Most private general contractors require it anyway, by contract. Skipping coverage rarely saves what owners expect once bid eligibility is factored in, and our overview of artisan contractor workers' comp requirements covers how the calculus differs by trade.

The Texas Anti-Indemnity Act Limits What Can Be Demanded of You

This is the part most Texas subcontractors have never been told. Subchapter C of Chapter 151 of the Texas Insurance Code took effect January 1, 2012, and changed how risk can be shifted in construction contracts.

Two definitions first. The indemnitor is the party promising to cover someone else's liability, usually you. The indemnitee is the party being covered, usually the general contractor or owner.

Section 151.102 voids an indemnity clause to the extent it makes you defend or indemnify the other party for that party's own negligence, fault, or breach. Section 151.104 closes the obvious workaround by voiding additional insured requirements to the same extent. Buying the coverage cannot resurrect an obligation the statute already struck down.

The carve-outs matter as much as the rule:

• Claims for bodily injury or death of your own employees, or your subcontractors' employees, fall outside the prohibition.
• Consolidated insurance programs, meaning owner- or contractor-controlled wrap-ups, are treated separately.
• The definition of construction contract excludes work on a single-family house, townhouse, duplex, and directly related land development, so residential builders operate under different rules than commercial subs.

None of this means you should sign a broad indemnity clause and count on a court to fix it later. It means an aggressive indemnity demand on a commercial project may be less enforceable than it looks, and that is worth raising before signature rather than after a loss. Whether a specific clause holds up is a question for a Texas construction attorney, not an insurance agent. Related reading: whether a signed waiver actually stops a lawsuit.

What Texas Contractor Insurance Costs

Contractor general liability is generally rated per $1,000 of gross receipts or payroll, with the class code setting the rate. That mechanism sits behind every quote you receive.

As an illustration, a painting contractor rated at $11 per $1,000 of receipts, running $400,000 in annual receipts, sees a base premium near $4,400 before credits, debits, minimum premiums, and endorsement charges. Change the class code, and that rate can double or halve. This shows the arithmetic and is not a quote.

The ranges below reflect what we commonly place for Texas contractors with modest receipts and clean loss history.

Two Texas factors push these numbers around. Hail and windstorm losses have hardened property and roofing appetite across North Texas and the coast, and coastal counties bring separate windstorm considerations. Non-subscriber status also changes the shape of a program, since employee injury exposure has to land somewhere.

Then there is the audit. Most general liability policies are audited after the term, and receipts above projection generate a bill. Subcontracted cost is where it bites: with no certificate on file for a sub you paid, auditors commonly rate that spend at your own class code. On a $200,000 subcontract, the true-up reaches four figures. Collect certificates before the first payment, and see our guide on verifying subcontractor insurance.

Texas Contractor Insurance by Trade

Class code drives eligibility as much as price, and exclusions differ more by trade than most owners expect.

• Electricians, plumbers, and HVAC contractors, the three licensed trades
• Concrete contractors and masonry contractors
• Framing contractors and drywall contractors
• Painting contractors and siding contractors
• Remodeling contractors and handyman operations
• Solar installers and landscapers

Smaller specialty operations may fit better on our Texas artisan contractor insurance page. Before assuming a scope is covered, check common GL exclusions by trade.

Common Mistakes to Avoid

• Reading "no state requirement" as "no requirement." The contract sets your real floor, and it is usually $1 million per occurrence with a $2 million aggregate.
• Going bare on workers' comp without doing the filings. Non-subscribers still owe DWC notices and annual reporting, and they surrender defenses that matter in litigation.
• Letting a certificate substitute for an endorsement. Under Texas law, a certificate cannot confer rights the policy does not already grant.
• Guessing low on projected receipts. It lowers the deposit premium and raises the audit bill by the same arithmetic.
• Ignoring city rules. Municipal registration and permit bonds vary widely across Texas and catch out contractors who cross metro lines.