Workers’ compensation insurance serves two groups at once: the employees who depend on it when something goes wrong, and the employers who need financial and legal protection when it does. Understanding what workers’ comp actually provides for both sides is worth far more than simply knowing whether you are required to carry it.
This guide covers the benefits workers’ comp provides, who is covered in Texas, what employers need to know, and the mistakes that create problems for both sides.
Key Takeaways
- Workers’ comp provides medical, income, death, and burial benefits for work-related injuries at no out-of-pocket cost to the employee.
- Texas recognizes four types of income benefits, each tied to a different level of injury severity and recovery timeline.
- Not all workers in Texas are automatically covered — independent contractors, domestic workers, and employees of nonsubscriber employers may not be.
- Texas employers who carry workers’ comp (subscribers) are protected from most employee injury lawsuits.
- Both employees and employers have reporting obligations after a workplace injury. Missing deadlines can affect whether a claim is valid.
What Is Workers’ Compensation Insurance?
Workers’ compensation insurance is an employer-funded policy that covers employees for work-related injuries and occupational illnesses. It pays for medical treatment, replaces a portion of lost wages, and provides disability and death benefits, all without requiring the injured worker to prove that the employer was at fault.
In Texas, the system is regulated by the Texas Department of Insurance, Division of Workers’ Compensation (TDI-DWC) under the Texas Workers’ Compensation Act.
One critical fact sets Texas apart from every other U.S. state: Texas does not require most private employers to carry workers’ compensation insurance. Employers who choose to carry coverage are called subscribers. Those who opt out are called nonsubscribers. This distinction carries significant legal consequences for both employees and employers, consequences that go far beyond the cost of a policy premium.
Benefits of Workers’ Compensation in Texas
Texas workers’ comp provides several categories of benefits depending on the nature and severity of the injury.
Medical Benefits
Workers’ comp covers all reasonable and necessary medical treatment for a covered work-related injury. This includes emergency room visits, surgery, hospitalization, specialist care, prescriptions, and ongoing treatment such as physical therapy.
The employee pays no deductible and no copay for covered care under a workers’ comp claim. In Texas, treatment is typically coordinated through the carrier’s designated Health Care Network (HCN), which means the carrier directs where the employee receives care.
Income Benefits
When a work injury prevents an employee from working or reduces their earning capacity, income benefits replace a portion of their lost wages. Texas workers’ comp recognizes four types of income benefits based on the stage and severity of the injury.
Temporary Income Benefits (TIBs)
Temporary Income Benefits apply when an employee cannot perform their regular job duties due to a work injury but has not yet reached maximum medical improvement (MMI). TIBs are calculated at 70% of the difference between the employee’s average weekly wage before the injury and what they are able to earn after it. They continue until the employee reaches MMI or returns to full duty.
Impairment Income Benefits (IIBs)
Once an employee reaches MMI, a doctor assigns an impairment rating that reflects any permanent damage from the injury. Impairment Income Benefits are paid based on that rating for a set number of weeks. A higher impairment rating results in a longer benefit period.
Supplemental Income Benefits (SIBs)
Supplemental Income Benefits apply to employees with significant permanent impairment who cannot earn at least 80% of their pre-injury wages. They are paid in quarterly periods while the employee continues to meet eligibility requirements. SIBs recognize that some injuries create long-term earning limitations that go beyond the impairment rating period.
Lifetime Income Benefits (LIBs)
Lifetime Income Benefits are reserved for catastrophic injuries that result in total and permanent disability. Qualifying conditions include the loss of both hands, feet, or eyes, severe brain injury, and paraplegia or quadriplegia. These benefits are paid for the remainder of the employee’s life.
Death Benefits
If a workplace injury or illness is fatal, workers’ comp provides death benefits to qualifying dependents. A surviving spouse receives benefits for life or until remarriage. Children receive benefits until age 18, or longer if they are attending college full-time or have a qualifying disability. Benefits are calculated as a percentage of the deceased worker’s average weekly wage.
Burial Benefits
Texas workers’ comp also provides a burial expense benefit to cover funeral costs associated with a work-related fatality. This benefit is paid in addition to death benefits to qualifying survivors.
Who Is Covered by Texas Workers’ Compensation?
Employees Who May Be Covered
Workers’ comp coverage extends to most employees working for a subscribing employer in Texas, including:
- Full-time employees
- Part-time employees
- Temporary workers
- Seasonal workers
- Public employees (state and local government)
- Employees injured while performing job-related duties
Workers Who May Not Be Covered
Not everyone who works for a business is automatically covered under a workers’ comp policy. Workers who may fall outside coverage include:
- Independent contractors
- Certain subcontractors
- Domestic workers
- Some agricultural workers
- Volunteers
- Workers employed by nonsubscriber employers
The independent contractor classification is particularly important in North Texas, where contractors and trades businesses frequently work with subcontractors. If a worker is misclassified as an independent contractor but a court later determines they were actually an employee, the employer may face liability without coverage in place.
What Texas Employers Should Know About Workers’ Compensation
Texas employers face a decision most employers in other states never have to make: whether to carry workers’ comp at all. Employers who purchase coverage through a licensed carrier and file a notice with the Texas Department of Insurance Division of Workers’ Compensation (TDI-DWC) become subscribers. Those who opt out become nonsubscribers.
Subscribers must post a written notice of coverage in the workplace and include proof of coverage in bids for government contracts. Nonsubscribers must file an annual notice with TDI-DWC and inform employees in writing that no coverage is in place. Nonsubscribers also lose key legal defenses if an injured employee sues them directly, including the ability to claim contributory negligence, assumption of risk, or the fellow servant rule.
Beyond the subscriber/nonsubscriber decision, all Texas employers should understand their reporting obligations. When a workplace injury occurs, the employer is required to report it to their carrier and, in certain cases, file a First Report of Injury with TDI-DWC. Maintaining accurate payroll records by employee classification also matters: workers’ comp premiums are based on payroll, and discrepancies surface at the end-of-year audit.
Common Mistakes Employees and Employers Should Avoid
For employees:
- Not reporting the injury to the employer promptly. Texas law requires employees to notify their employer within 30 days of a work-related injury.
- Seeking treatment outside the carrier’s Health Care Network without prior authorization, which can result in costs not being covered.
- Not following the prescribed treatment plan, which can affect both recovery and benefit eligibility.
- Waiting too long to file a formal claim. Texas has a one-year statute of limitations for workers’ comp claims from the date of injury.
For employers:
- Failing to post the required workers’ comp notice (subscribers must post coverage notice; nonsubscribers must post non-coverage notice).
- Misclassifying employees as independent contractors to avoid coverage obligations.
- Delaying injury reports to the carrier, which complicates the claims process and can create disputes over coverage.
- Not documenting incidents properly. An incident report, witness statements, and a record of the medical referral all support a clean claims process.
Final Thoughts
Workers’ compensation benefits both the people who do the work and the businesses they work for. Employees get access to medical care and income support when they need it most. Employers get a structured claims process and legal protection that nonsubscription cannot provide.
For Texas business owners, understanding the full picture of what workers’ comp provides is the starting point for making the right coverage decision for your team.
Frequently Asked Questions
Is workers’ compensation mandatory in Texas?
Texas is the only state that does not require most private employers to carry workers’ comp. It is required for businesses with government contracts. Employers who choose not to carry it must file an annual notice with TDI-DWC and notify employees in writing, and they lose key legal defenses if an injured employee sues.
What benefits are available under Texas workers’ compensation?
Texas workers’ comp provides medical benefits (all covered treatment at no cost to the employee), four types of income benefits (TIBs, IIBs, SIBs, and LIBs depending on injury severity), death benefits for qualifying dependents, and burial expense benefits.
How do I know if my employer has workers’ comp coverage?
Subscribing employers are required to post a notice of workers’ comp coverage in the workplace. You can also verify coverage directly through the TDI-DWC online database, which lists all employers who have filed coverage notices with the state.
What should I do first after a workplace injury?
Report the injury to your employer as soon as possible. Texas law requires employees to notify their employer within 30 days of a work-related injury. Seek medical care through the carrier’s Health Care Network if your employer is a subscriber. Document the circumstances of the injury while the details are fresh.
Can I receive workers’ comp if I caused my own injury?
Generally yes, as long as the injury was accidental and occurred in the course and scope of employment. Workers’ comp is a no-fault system for most injuries. Exceptions apply: injuries caused by intoxication, intentional self-harm, or deliberate misconduct are excluded from coverage.Understanding your options starts with knowing what workers’ comp actually provides. At Bickerstaff Insurance, we work with multiple carriers and can help Texas employers find coverage that fits their team and their business. Get a quote or contact us and we’ll walk through your options together.
