While the majority of insurance coverages in Texas are not required, small business owners should still consider purchasing commercial insurance for their businesses to provide financial protection against claims of negligence while helping your business during periods of downtime or with first-party property damage. We will cover what is required and what is not, the average cost for many policies, and an overview of what type of insurance is offered in Texas.
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Texas Small Business Insurance Requirements
Small business insurance in Texas does not have any broad requirements that businesses must adhere to. When considering whether or not Texas small business insurance is required, it is important to always keep in mind the cost of being uninsured. For example, the median award by a jury in cases involving product liability claims is $3.9 million. Also, there are certain situations where insurance may still be required.
Workers’ Compensation
They do things differently in Texas—and insurance is no exception. Texas is one of two states that does not have a requirement for workers’ compensation, with South Dakota being the other. There are several important elements regarding workers’ compensation in Texas. The following operations require the coverage:
- Public employers and state universities
- Construction contractors for public entities
- Motor carriers
- Liquid propane and natural gas dealers
- Those employing inmates in work furlough programs
If a business chooses to have workers’ comp, it is a “subscriber” and is covered for injuries regardless of fault. Businesses that decide to not offer workers’ comp are considered “non-subscriber companies.” These businesses are open to the risk of being sued by injured workers.
As you can see, just because it is not required doesn’t mean a small business shouldn’t consider offering workers’ comp to its employees. Especially because in Texas, if the employer does not offer it and an employee becomes injured or ill, the business risks a lawsuit.
General Liability
General liability insurance is not required statewide in Texas. However, local municipalities may require it, so check with the local government to see if you need to carry it. Additionally, you will usually need a certificate of insurance (COI) to bid on a project, rent a space, or participate in an event.
There are some specific industries that require general liability for licensure. Some examples are:
- General contractors in Texas are required to carry a general liability policy with a minimum of $1 million per occurrence and $2 million aggregate limit.
- Electricians have a minimum requirement for general liability of $300,000 per occurrence, $600,000 aggregate, and $300,000 for products and completed operations.
- Heating, ventilation, and air conditioning (HVAC)-licensed contractors are required to carry general liability. The amount depends on if you have a class A or class B license.
- Daycares are required to carry general liability with a minimum occurrence limit of $300,000 per occurrence.
This list is not exhaustive, and requirements by locality and even the scope of the job can change. Make sure you work with an insurance company that is up to date on all requirements for Texas liability insurance in your area.
Commercial Auto
If you have a work vehicle, insurance is a requirement. The Texas Department of Insurance has a minimum liability requirement of $30,000 per person and $60,000 per accident. It also requires you to carry $25,000 for property damage.
Types of Small Business Insurance for Texas
While there is no broadly required business insurance in Texas, some level of coverage may be required—depending on the work or type of contract. Regardless, the following Texas business insurance coverages are ones that a small business owner should be aware of and consider.
Coverage Type | What it Is |
|---|---|
General Liability | Covers third-party claims of bodily injury, property damage, and personal injury, and reputational harm |
Professional Liability | Covers third-party financial harm or loss as a result of advice or failure to perform a contracted service |
Commercial Property | First-party coverage for property owned, typically fixed property or building contents |
Business Owner’s Policy (BOP) | Liability protection, first-party protection for your property and, usually, business lost income coverage |
Commercial Auto | First and third-party coverage for vehicles covering damage and injuries |
Workers’ Compensation | Covers medical bills and wage replacement for employees who become injured or ill because of their job |
Commercial Umbrella | Excess liability coverage for claims that exceed the limits of your liability policy |
Cyber Liability | First and third-party coverage for losses related to data breaches, hacking, or other cyber-related losses |
Inland Marine | First-party covered for tools and equipment |
General liability insurance in Texas provides broad coverage for your business from third-party claims. These claims are focused primarily on three areas:
- Property damage.
- Bodily injury.
- Personal and advertising injury.
This is one of the most important policies for a business to have because the coverage is so broad. If someone’s property is damaged, or someone is injured from negligence by your business, you can file a claim on your general liability policy to resolve the situation.
Texas liability insurance often includes additional coverage, like product liability for losses others claim that came from a product you manufactured or helped distribute. It could also be insurance for the damage caused to a premise that your business rents.
Another important type of business insurance in Texas is professional liability. Commonly referred to as errors & omissions (E&O) insurance, professional liability is more focused on industries in the service sector. If someone claims you gave them bad financial advice or failed to deliver on a contract, then this coverage is what you would turn to for help. If you own a financial planning or architecture firm in Texas, this is a policy you should consider.
This is first-party coverage, meaning it is for your property and not someone else. If you own a building or have filled a rented office space with furniture, or you have a warehouse full of inventory, this insurance is something you’ll need to consider. Depending on how the provider writes the policy, it may have additional coverage for tools and equipment—or you may need to insure that separately.
Losses are usually handled on a named-peril basis, and coverage is typically limited to the listed location. This means the types of losses covered are listed in the policy, which may say fire, theft, or vandalism are covered losses. But wear and tear of the office couch and roof are not covered.
For businesses typically with revenue under $5 million or less than 100 employees, an option for coverage is a BOP. It is a combination of general liability and commercial property. Usually, providers will include business income insurance, too.
There are several benefits of a Texas BOP. It is usually more affordable to bundle the policies than to purchase each one separately. You also have the convenience of having one policy for multiple types of coverage.
Read our comparison of BOP vs General Liability Insurance to see how the two stack up side-by-side. We compare their endorsements, costs, and use cases among other things.
If your business has a delivery vehicle or work truck, or has several semi-trucks, you will need some form of commercial auto insurance. A bit like a BOP, a single auto policy can carry both liability and first-party coverage for your vehicle. It can also have first and third-party injury coverage and some additional options like roadside assistance.
Workers’ compensation insurance is helpful coverage for employees because it helps with wage replacement and medical bills if an employee gets injured or becomes ill from their job. This insurance is required in most states. However, it is not a required business insurance in Texas.
A commercial umbrella policy is an excess liability policy you can purchase. If you work in a riskier industry and are concerned the limits on your general or professional liability policy may be insufficient, a commercial umbrella policy can be purchased for additional limits. These limits would not come into play until the limits of the other policy are exhausted.
Similar to a BOP, cyber liability usually is divided into first and third-party coverage. First-party cyber liability helps with the expenses you face from a data breach, which can include investigating and notifying anyone impacted.
The third-party coverage is a type of liability that can help protect your business if customers decide to sue you over negligence. This part of the policy can also help with fines and penalties from government or private entities.
If you are a Texas business owner who works in an industry with tools or equipment, like a painter, contractor, or handyperson, you’ll need to look into inland marine. This is a first-party coverage similar to commercial property.
However, commercial property is limited to a listed location, whereas inland marine insurance “travels” with the tools and equipment. So, if you are working at a job site and an expensive piece of equipment is stolen, you would file a claim on your inland marine policy. Some providers will provide blanket coverage for tools and equipment and others will have you list or “schedule” each individual item on this policy.
Texas Small Business Insurance Costs
Costs for TX business insurance vary widely depending on the industry and size of the company. We obtained sample quotes from a variety of different brokers and carriers for insurance for LLCs in Texas. All of them were for the same size company: three employees and an annual revenue of $250,000.
Business Type | Estimated Monthly Premium | Coverage Type | Coverage Amount |
|---|---|---|---|
General Contractor | $246 to $456 | General liability | $1 million per occurrence, $2 million aggregate |
Restaurant | $148 to $175 | General liability | $1 million per occurrence, $2 million aggregate |
Restaurant | $77 to $113 | Workers’ comp | $100,000 per incident $500,000 per disease $100,000 per employee |
Handyperson | $50 to $177 | General liability | $1 million per occurrence, $2 million aggregate |
Clothing Boutique | $50 to $66 | General liability | $1 million per occurrence, $2 million aggregate |
There are a number of factors that providers consider when evaluating premiums. Some of these are:
- The geographic region within Texas including the specific county
- Yearly revenue and payroll
- Claims history
- Risk management and training
- Business experience
- Prior insurance history
Where To Get General Liability Insurance in Texas
When looking to get commercial insurance in Texas, there are several options available: a provider, an agent, and a broker.
Provider
Whether you use a broker or an agent, the policy will be underwritten and serviced by an insurance company, also called a provider or carrier. There are providers who work directly with consumers and generate quotes online, which then allow you to purchase a policy, and there are those who take an approach by offering insurance online and working with agents. Finally, there are carriers who only sell insurance through agents.
Agent
An agent works for the insurance company and helps connect the carrier with prospective policyholders. Depending on the agency, the options may be limited solely to one insurance company.
Broker
A broker is like an agent—except the broker works on behalf of the customer and not on behalf of the insurance company. Usually, brokers will work with many different carriers and provide insurance advice to the client while helping them find the best option for insurance.
Simply Business is an online broker that works with multiple insurance companies offering Texas business insurance. In 10 minutes or less, you can compare quotes online, tailor the coverage and see adjusted premiums amounts, and then purchase a policy without speaking to anyone. Read our review of Simply Business to learn more about the insurer.
Texas Business Insurance Statistics—Why Insurance Is Important
Small businesses are a key part of the Lone Star state economy. According to the Small Business Administration (SBA) 2022 report on Texas, small businesses play a large part in its economy.
- It has 3.1 million small businesses.
- It has 4.9 million small business employees.
- 44.5% of Texas employees are employed by a small business.
- Of the 38,074 firms that identified goods from Texas, 35,124, or 92.3%, were small. Small business exports totaled 95.4 billion in 2020.
What’s more, the state has the second-highest population in the US, with 30 million people calling it their home and a 2022 GDP of $1.88 trillion. Combining this information paints a picture that the state—with a strong economy focused on small businesses—is a large marketplace for small business insurance.
Frequently Asked Questions (FAQs)
No, it isn’t—and Texas is one of the two states to not require businesses to offer workers’ comp for its employees (South Dakota is the other). However, if your business is a construction company working on government projects, then workers’ comp is required.
General liability in Texas can cost anywhere from $50 to $177 monthly for a handyperson. For a larger business, premiums can increase by several hundred dollars per month.
In Texas, insurance is regulated by the Texas Department of Insurance (DOI). The DOI oversees all types of insurance—including small business insurance. Note that there is no federal regulation of insurance, and each state is different.
The Texas Department of Insurance handles complaints regarding insurance companies. You can file a complaint online using a form or you can call 800-252-3439.
According to the SBA, there are 3.1 million small businesses in Texas that employ nearly 5 million people, or 44% of the Texas workforce.
Bottom Line
Deep in the heart of Texas are small business owners who are the backbone of the state’s economy. While insurance isn’t required statewide, Texas business insurance is an important part of a small business’ financial success. The most essential policies are general liability, commercial property, and workers’ compensation.
Simply Business is a broker that can help your small business find affordable coverage quickly. Get free, no-obligation quotes to find insurance for your business.
