While Texas is the only state that does not legally require private employers to carry workers’ compensation insurance, it is still highly advisable for small businesses to invest in this crucial coverage. Opting out of workers’ compensation might seem like a cost-saving measure at first glance, but the potential risks and financial consequences of workplace injuries can quickly outweigh any initial savings. Here’s a closer look at why Texas small businesses should strongly consider carrying workers’ compensation insurance despite the lack of a legal mandate.
1. Financial Protection Against Workplace Injuries
Accidents can happen in any workplace, regardless of the safety measures in place. In the event of a workplace injury, workers’ compensation insurance covers medical expenses, lost wages, and rehabilitation costs for the injured employee. Without this coverage, small businesses in Texas could face substantial out-of-pocket expenses, which could significantly impact their bottom line.
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Example: If an employee suffers a back injury while lifting a heavy box and requires surgery, the medical bills could easily reach tens of thousands of dollars. Workers’ compensation insurance would cover these costs, whereas without it, the business would be directly responsible for paying these expenses.
2. Protection from Lawsuits
In Texas, businesses that do not carry workers’ compensation are known as “non-subscribers.” Non-subscribers are exposed to a higher risk of lawsuits from injured employees because, unlike businesses with workers’ compensation, they cannot claim certain legal protections. Workers’ compensation typically provides employees with defined benefits for workplace injuries and, in return, limits their right to sue the employer. Non-subscribers, however, lose this protection and could face costly legal battles, potentially resulting in significant settlements or judgments.
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Example: An employee who slips and falls on a wet floor might choose to sue the employer for negligence if workers’ compensation is not in place. Legal defense costs alone could be overwhelming, not to mention the possibility of paying out large settlements.
3. Demonstrating Commitment to Employee Well-being
Offering workers’ compensation insurance is an indication that a business prioritizes its employees’ health and safety. This can enhance the company’s reputation, helping to attract and retain quality workers. Employees are more likely to feel secure knowing that they are covered in the event of an accident, which can lead to improved morale and loyalty.
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Example: A small manufacturing business that carries workers’ compensation insurance demonstrates to its workers that it cares about their safety. This can reduce turnover, as employees might feel more valued and secure in their roles.
4. Compliance with Client and Contractor Requirements
Some clients, contractors, and business partners may require proof of workers’ compensation insurance before entering into contracts. This is especially common in industries like construction, where the risk of injury is higher. By carrying workers’ compensation insurance, small businesses can expand their opportunities and avoid missing out on lucrative contracts.
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Example: A small Texas construction company without workers’ compensation might be disqualified from bidding on certain projects that require subcontractors to have this coverage.
5. Quicker Recovery and Return to Work
Workers’ compensation insurance often includes programs designed to help injured employees recover and return to work as quickly as possible. Insurance providers typically have access to medical professionals and rehabilitation services that can facilitate a smoother recovery process. This not only benefits the injured employee but also helps the business maintain productivity by minimizing the time the employee is out of work.
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Example: An employee who sustains a minor injury might receive physical therapy services through the workers’ compensation provider, enabling them to return to their job sooner and at a lower cost than if the employer had to arrange for these services independently.
6. Managing Uncertainty and Mitigating Risk
Running a small business in Texas comes with various uncertainties, from market fluctuations to changing regulations. By having workers’ compensation insurance, business owners can mitigate at least one major area of risk: the financial implications of workplace injuries. The relatively predictable cost of insurance premiums can be factored into operating expenses, providing a safeguard against unexpected, potentially devastating medical or legal costs.
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Example: By paying regular workers’ compensation premiums, a restaurant owner can avoid the financial shock of suddenly having to pay for an employee’s emergency surgery after a kitchen accident.
7. Navigating Texas-Specific Challenges
Although workers’ compensation is not legally required in Texas, the state’s unique regulations and systems create specific challenges for non-subscribers. Employers without workers’ compensation must notify their employees and the Texas Department of Insurance (TDI) of their non-subscriber status. They must also regularly report work-related injuries and illnesses to the TDI, adding an administrative burden.
Furthermore, non-subscribers may face limitations when defending themselves in court. Texas law restricts certain defenses for non-subscribers in injury lawsuits, such as claiming that the employee was negligent or that they assumed the risk of injury by accepting the job. Carrying workers’ compensation insurance can simplify compliance and legal risk management, offering a clearer path for both employers and employees in case of workplace injuries.
Conclusion
While small businesses in Texas are not legally obligated to carry workers’ compensation insurance, the benefits of doing so are significant. From financial protection and lawsuit prevention to demonstrating care for employee welfare and meeting client requirements, workers’ compensation insurance can provide vital safeguards for a business’s future. Given the relatively manageable cost of premiums compared to the potential expenses of workplace injuries, investing in this insurance is a prudent decision for any small business in Texas. By securing workers’ compensation coverage, business owners can protect their employees, assets, and long-term viability.
Many employers tell us that they have not purchased workers’ compensation because they believe the premiums are “too high.” The workers’ compensation market in Texas has changed dramatically in recent years. We have many national and regional firms now competing in this market and premiums have consistently come down for good risks.
If you would like to discuss how your business should insure with workers’ compensation and to receive competitive proposals for coverage, please give us a call at (210) 822-2333 or send us an email at .
