Do I need business insurance in Texas?

Small businesses need certain coverage in Texas. Businesses that fail to meet Texas’s insurance requirements could be fined, lose their professional license, and damage their reputation.

Eric Goldberg, department vice president and counsel, commercial lines, at the American Property Casualty Insurance Association, an insurance industry trade association, says businesses that don’t follow the insurance laws in their state could face severe penalties.

“Businesses should work with their insurance agent or broker to make sure they are complying with all state laws and requirements with regards to commercial insurance coverage,” Goldberg says. “Failing to do so could result in severe financial penalties or even criminal prosecution in some states.

“While penalties and sanctions vary by state, they often include relatively sizable monetary penalties for failures to comply,” Goldberg says. “Most states may issue stop work orders on businesses that fail to secure workers' compensation insurance. In addition to the monetary fines and orders to suspend operations, employers are subject to criminal prosecution in many states.”

Types of small business insurance in Texas

Below are some of the most common types of small business insurance policies. Some are required by Texas laws, and others might be necessary to sign a lease or secure business contracts.

Even when not required by legal or contractual obligations, some of these policies just make good business sense because they protect your financial assets.

General liability: This covers common business risks such as a customer accidentally slipping and falling at your property and employee damage to a customer’s property. It also covers product liability, copyright infringement and advertising injury.

Commercial property: This insures against losses from things like fire, severe weather, vandalism and theft. Most commercial landlords require commercial property insurance in order to sign a lease.

Workers’ compensation: This covers work-related injuries and illnesses for your employees, including medical bills and lost wages. Regular health insurance may not cover on-the-job injuries and illnesses.

Commercial auto: This covers the cost of an accident if one of your employees was at fault for an accident while using one of your vehicles for business.

Professional liability/medical malpractice: This covers the cost of lawsuits from clients who are unsatisfied with your work. This includes accusations of negligence, breach of contract, missed deadlines or a mistake that causes someone financial or bodily harm. Professional liability is also known as errors and omissions (E&O) coverage.

What types of small business insurance are required in Texas?

Any business that owns vehicles in Texas must insure them. Only certain types of employers are required to carry workers’ comp insurance, and professional liability may be needed in some cases.

Outside of state law, it’s worth noting that certain types of insurance are required to bid on federal contracts. This includes workers’ comp, general liability and automobile liability.

Commercial auto insurance

Texas requires all business-owned vehicles to have a minimum amount of commercial auto liability coverage: $30,000 of bodily injury per person, $60,000 of bodily injury coverage per incident and $25,000 in property damage coverage.

The state requires higher coverage amounts for heavier vehicles. For example, vehicles weighing less than 26,000 pounds that carry household goods must have at least $300,000 in liability coverage. Semi-trucks and other large vehicles that have a serial number from the Texas Department of Transportation or the U.S. Department of Transportation must carry a minimum combined limit of $750,000 if they travel on the nation’s highways.

You can verify federal coverage requirements by checking your USDOT number with the Federal Motor Carrier Safety Administration.

Workers’ compensation insurance

In Texas, most employers aren’t required to carry workers’ comp for their employees, although any business that doesn’t have this coverage is required to notify their employees and the state. They must also notify the state of any employee injuries on the job.

However, Texas does require workers’ comp for the following entities:

  • Public employers, such as governmental bodies and universities.
  • Companies that do business with the state and other government entities.
  • Bus carriers.
  • Liquid gas haulers.
  • Inmate furlough programs.

Although not required, many employers in Texas do carry workers’ comp because it protects them from employee lawsuits over workplace injuries.

Professional liability/medical malpractice

Texas doesn’t require most small business owners to carry professional liability or medical malpractice coverage. A business still might need this coverage to sign a commercial lease, acquire customers or work on government contracts. Hospitals and medical clinics often require medical malpractice coverage for the doctors, nurses and other professionals who work there.

How much is small business insurance in Texas?

The cost of business insurance depends on several factors such as your business location, the type of work you do, how many employees you have and the coverage levels you’re seeking.

According to Insureon, an insurance broker specializing in small business coverage, these are the average cost of common business insurance policies:

  • General liability: $500 per year.
  • Commercial auto: $1,762 per year.
  • Business owner’s policy: $684 per year.
  • Workers’ compensation: $542 per year.
  • Commercial property: $800 per year.
  • Professional liability/E&O: $735 per year.

Which companies offer small business insurance in Texas?

There are many small business insurance companies offering policies in Texas, so you have several options. The following companies offer small business insurance in most states.

The Hartford boasts that it has more than 200 years in the insurance business, with more than 30 years devoted to small businesses.

Hiscox says it has more than 50,000 small business customers and bills itself as “America’s leading small business insurer.”

Next Insurance specializes in small business insurance.

Progressive is the number one commercial auto insurer in the country by market share.

Travelers is the second-largest commercial auto insurance company by market share.

How does business insurance work in Texas?

Small business insurance helps you manage your business risks and offers financial security for every small business owner. Many policies are also required by Texas laws, or to work on government contracts.

When you buy an insurance policy, you choose the amount of coverage you need in exchange for a monthly or annual premium that you pay to the insurance company.

Most of these policies will have two limits, a per-occurrence limit that covers individual events and an aggregate limit that is the total amount a policy will pay during a policy period, which is typically one year.

If you file a claim, you’ll pay the deductible, and then your insurance would kick in and provide coverage up to your policy limit.

How to get business insurance in Texas

You have many options for small business insurance in Texas. You could find an agent through your friends and business contacts or search online. Many insurance companies today allow you to compare policies, get advice and compare free quotes online.

How to save on small business insurance in Texas

There are many ways to save money on small business insurance in Texas.

You can start by comparing your coverage options from multiple providers, or through an online brokerage such as Insureon, which allows you to compare policies from multiple providers.

If you need both commercial general liability and commercial property insurance, you could bundle these policies into a business owner’s policy (BOP), which is usually less expensive than buying these policies separately.

You could also:

  • Work with your insurance company to identify and reduce risks.
  • Use a risk management plan to reduce your chance of a claim.
  • See what changes you can make to your property. For example, installing a sprinkler system might reduce the cost of property insurance.
  • Pay your premium annually, which might earn you a discount from your insurance company.

How do I get a certificate of insurance for my small business?

When you buy coverage from an insurance company, it will send you proof of insurance either by mail, email or via an app on your phone.

Does my business industry affect my state insurance requirements?

The type of work you’re in can certainly have an impact on the insurance requirements for your business. Most states require commercial vehicle insurance for any business that owns vehicles.

The type of work you do and the number of employees you have can also affect your requirements for workers’ comp insurance. You might also need certain types of coverage to qualify for contracts with state, local and federal government entities.

If you have a professional license, such as legal or medical, your state may require you to have professional liability, errors and omissions or medical malpractice coverage.

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What our expert says

Q: What happens if a small business doesn’t follow state insurance laws?

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Eric Goldberg Department vice president and counsel, commercial lines, at the American Property Casualty Insurance Association.
"Failing to do so could result in severe financial penalties or even criminal prosecution in some states."