Understanding the Workers' Comp Payment Process in Texas

No business is immune to workplace injuries. Whether you run a construction company, manufacturing plant, or office space, accidents can happen anywhere. According to the Texas Department of Insurance, in 2022, private industry employers in Texas reported 178,800 nonfatal workplace injuries and illnesses, That's nearly 490 incidents every day, many leading to lost work time, medical costs, and legal claims. Without proper coverage, businesses may face expensive lawsuits and compensation payouts—posing a significant financial risk.

That's where workers' compensation insurance comes in. However, Texas's workers' compensation rules differ from those in other states, making it crucial for business owners to understand how the system works.

In this post, we’ll break down what workers' compensation is, whether Texas businesses are required to carry it, how the payment process works, and how much it costs.

What is Workers' Compensation?

Workers' compensation is a type of business insurance that helps cover medical costs, lost wages, and other benefits for employees who are injured or become ill due to their jobs.

Unlike general health insurance, workers' compensation only applies to work-related injuries and illnesses. This means that if a worker gets hurt while performing job duties—whether at a construction site, warehouse, or office—they may be eligible for benefits under workers' compensation.

What Does Workers' Compensation Cover?

Workers' compensation protects employees and employers by covering work-related injuries and illnesses while limiting legal risks for businesses. Here's what workers' compensation typically covers:

• Medical expenses: Covers hospital visits, doctor consultations, surgeries, medications, rehabilitation, and any necessary treatments related to the injury or illness.
• Lost wages: This policy provides partial income replacement for employees who need time off work to recover from a job-related injury or illness.
• Disability benefits: Helps employees who suffer temporary or permanent disabilities due to workplace accidents by providing financial assistance.
• Vocational rehabilitation: Covers training programs or job placement assistance if an injured worker can't return to their previous role and needs to transition into a new job.
• Death benefits: Provides financial support to an employee's family who dies due to a work-related accident, including coverage for funeral expenses and ongoing support payments.
• Workers' compensation protects businesses: It protects your business by reducing legal and financial risks. When you carry workers' comp insurance, employees cannot sue you for workplace injuries. 

Instead, claims are handled through the insurance process, helping you avoid costly lawsuits and ensuring workplace injuries are managed efficiently.

How Much Does Workers’ Compensation Insurance Cost in Texas?

Workers' compensation insurance costs in Texas vary depending on several factors. According to industry data, the average cost of workers’ compensation insurance in Texas is $576 per year, or about $48 per month for small businesses.

 The Factors that Affect Workers’ Compensation Costs

• Industry risk level: High-risk industries like construction, manufacturing, and oil & gas typically pay higher premiums due to the increased likelihood of workplace injuries.
• Payroll size: Workers' compensation rates are calculated per $100 of payroll, so businesses with larger payrolls will pay more in total premiums.
• Claims history: Businesses with frequent or severe past claims often face higher insurance costs due to the increased risk they present to insurers.
• Coverage limits and deductibles: Choosing higher coverage limits and lower deductibles increases costs. While higher deductibles can lower premiums, they require businesses to pay more out-of-pocket for claims.
• Workplace safety programs: Businesses with strong safety programs and lower accident rates may qualify for lower premiums and discounts.

Ways to Lower Workers' Compensation Costs

• Improve workplace safety: Implementing strong safety measures reduces the risk of accidents and lowers long-term insurance costs.
• Choose a policy that fits your business needs: Work with an experienced insurance provider like TWFG Khan Insurance to select coverage that offers the best protection without unnecessary add-ons.
• Maintain a clean claims history: Fewer claims lead to better rates and eligibility for discounts over time.

The Workers' Compensation Payment Process in Texas

Workers' compensation in Texas follows a structured process to ensure injured employees receive the benefits. Here’s how the workers’ compensation payment process works in Texas:

1. The employee reports the injury:

Your employee must notify you about a workplace illness or injury within 30 days of the incident. Encourage immediate reporting to prevent disputes over whether the injury is work-related.

2. You (employer) file a report:

Once informed, you must file a report with your workers’ compensation insurance provider and the Texas Division of Workers’ Compensation (DWC) within eight days of learning about the injury.

3. The employee seeks medical treatment:

If you have a workers’ comp healthcare network, your employee must use doctors within that network unless it’s an emergency. The sooner they receive treatment, the smoother the claims process will be.

4. The insurance company reviews the claim:

Your insurer will evaluate the claim to determine eligibility for benefits. They may request additional details or investigate to verify the claim before approval.

5. The first payment is issued:

If the claim is approved, your insurer must issue the first income benefits payment within 15 days of receiving your injury report. The insurer typically covers Medical expenses directly, so your employees don't have to pay out-of-pocket.

6. Ongoing benefits are provided as needed:

Depending on the harshness of the injury, employees may get various types of benefits, including:

• Medical benefits: Coverage for doctor visits, surgeries, medication, and rehabilitation.
• Income benefits: Partial wage replacement for employees unable to work.
• Supplemental benefits: Additional payments if the worker has long-term limitations.
• Lifetime benefits: Permanent compensation for severe injuries like amputations or blindness.

7. The claim may be disputed:

If your insurer denies a claim, your employee can request a review from the Texas Division of Workers’ Compensation. If disputes remain unresolved, the case may go to a hearing before an administrative law judge.

Texas' workers’ compensation payment process is designed to protect you and your employees by ensuring fair compensation and preventing fraudulent claims. By staying informed and proactive, you can reduce risks and maintain compliance with state regulations.

What's Not Covered Under Workers' Compensation?

Workers’ compensation does not cover every situation. Employees may not qualify for benefits if the injury occurs due to:

• Intoxication or drug use: If an employee is under the influence of alcohol or drugs at the time of the accident.
• Self-inflicted injuries: If an employee intentionally harms themselves.
• Horseplay or misconduct: If an injury happens while an employee is goofing around or breaking workplace safety rules.
• Injuries outside of work: If an employee gets injured while commuting or engaging in activities not related to their job.
• Acts of God (unless job-related): If an injury happens due to natural disasters, like floods or earthquakes, unless the employee's job exposed them to these risks.

Coverage gaps can expose your business to unexpected risks, such as contractor-related liabilities, employee disputes, or damages caused by faulty workmanship—issues that workers' compensation alone doesn't cover.

That’s where TWFG Khan Insurance steps in. We help you identify potential coverage gaps and provide tailored insurance solutions beyond workers' compensation. Whether you need general liability insurance, employment practices liability insurance (EPLI), or additional coverage for independent contractors, we ensure your business stays protected from all angles.

Are All Employers Required to Carry Workers' Compensation Insurance?

Unlike most states, Texas does not require private employers to carry workers’ compensation insurance. This makes Texas unique, as it allows businesses to operate as "non-subscribers," meaning you are not legally obligated to provide workers' comp coverage.

However, in some instances, workers' compensation insurance is mandatory:

• Government contractors: If you work on government contracts, you must provide workers’ compensation insurance for employees on the project.
• Public employers: If you operate a city, county, or state agency, you are required to provide workers' compensation for your employees.
• Certain transportation companies: If your business involves motor carrier transportation, you may be required to carry workers’ comp under federal or state regulations.

What Happens if You Choose Not to Carry Workers’ Compensation?

If you decide to opt-out, you lose important legal protections:

• Your business can be sued by injured employees for workplace injuries.
• You cannot use common legal defenses, such as claiming the injury was caused by employee negligence.
• You must notify employees in writing that they do not have workers' comp coverage.
• You must file an annual notice with the Texas Division of Workers’ Compensation (DWC).

Even though Texas doesn’t require it, carrying workers' compensation insurance is vital, protecting your business from costly lawsuits and medical expenses.

Protect Your Business with TWFG Khan Insurance

Workers' compensation is more than just a policy—it’s a critical safeguard for your business and employees. At TWFG Khan Insurance, we specialize in providing tailored workers’ compensation coverage that fits your industry and risk level, ensuring financial protection and compliance with Texas regulations.

With access to top-rated insurance carriers, we help businesses:

• Find competitive rates with top providers: We compare multiple insurance carriers to secure the best coverage at the most affordable rates, ensuring you get maximum protection without overpaying.
• Customize coverage to match your business needs: Whether you operate in construction, manufacturing, oil & gas, or retail, we tailor policies to address the unique risks of your industry, providing coverage that fits your operations.
• Lower costs through proactive risk management: Our team helps you implement workplace safety programs, claims prevention strategies, and cost-saving measures that can reduce your premium over time.
• Ensure compliance with Texas workers’ compensation laws: Avoid legal risks and financial penalties by ensuring your business meets state requirements, whether you're a subscriber or a non-subscriber to Texas workers’ comp.
• Simplify claims handling with expert support: When an injury occurs, our team provides step-by-step assistance, ensuring your claims are processed efficiently and your business remains protected from unnecessary liabilities.

Get a quote with us to secure the best workers’ compensation insurance for your business today!