If your business is a Texas corporation, whether a C-corporation or an S-corporation, you are not legally required to carry workers compensation insurance. Texas is the only state where coverage is elective (optional) for private employers, so having employees does not make it mandatory. What a corporation should weigh is how its officers are covered, and how much lawsuit exposure it is willing to carry by going without.
Who this is for: Owners and officers of a Texas corporation, from a small S-corp with a few employees to a closely held company whose owners draw a salary.
The short version
- A Texas corporation may choose to carry workers comp, but it is not required in most cases.
- If the corporation carries a policy, a corporate officer is included as a covered person unless specifically excluded by endorsement (a written add-on to the policy that names who is on or off).
- Under Labor Code section 406.097, any corporate officer can be excluded this way regardless of ownership share, so a minority officer can elect out just as a majority owner can.
- Regular W-2 employees are covered by the policy; the exclusion choice applies to owners and officers.
- Opting out makes the corporation a non-subscriber that can be sued for negligence without its usual defenses.
How officers are treated
Texas law puts a corporate executive officer in the same bucket as a sole proprietor or partner: if the corporation carries a policy, the officer is included as a covered person entitled to benefits, unless the officer is specifically excluded by endorsement. This choice does not depend on how much of the company the officer owns. Under Labor Code section 406.097(a), any executive officer can be named off the policy by endorsement, so a founder-owner drawing a salary and a minority officer alike can choose to be on or off the coverage. The 25 percent figure that appears in the statute serves a narrower purpose: under section 406.097(b), for an officer who owns at least 25 percent, the dual-capacity doctrine cannot be used to undo that officer's exclusion.
Covered, excluded, or required
| Who | Default on a corporate policy | Can they be excluded? |
|---|---|---|
| W-2 employee | Covered | No, employees are covered by the policy |
| Corporate executive officer | Included unless excluded | Yes, by endorsement, whatever their ownership share |
| The corporation on a government construction job | Coverage required | No, every worker on the public project must be covered |
The lawsuit trade-off
The corporate form shields shareholders from many business debts, but it does not by itself answer an injured worker. If the corporation opts out of comp, it is a non-subscriber, and an injured employee can sue the company for negligence while the law removes the defenses that the employee was at fault, knew the risk, or was hurt by a co-worker. Carrying a policy makes comp the employee's exclusive remedy, which generally blocks that lawsuit. For a closely held corporation whose owners also work in the business, that protection often matters as much as the medical and wage benefits themselves.
A Dallas example
Illustrative, not a quote. A Dallas HVAC company is set up as an S-corporation with two owner-officers and six field technicians. Both are executive officers, so each can elect to be excluded from coverage, and they do, since they mostly run the office. They keep a policy covering the six technicians, whose rooftop and attic work carries real injury risk. When a technician falls from a ladder, the injury is covered and the company keeps its exclusive-remedy protection. The owners ask us to confirm the technicians are rated on the correct class of work so the premium is not inflated by a higher-risk code.
Real questions Texas owners ask
Does my Texas corporation have to carry workers comp?
In most cases, no. A corporation is a private employer, and coverage is elective in Texas, so having employees does not make it mandatory. The main exception is work on a government building or construction contract.
As an officer, am I covered by our policy?
Yes by default. If the corporation carries a policy, you are included as a covered person unless you are specifically excluded by endorsement. Owners often choose to exclude themselves to keep their wages out of the premium.
As a minority owner-officer, can I opt out of coverage?
Yes. Under Labor Code section 406.097, any corporate executive officer can be excluded from the policy by an endorsement, whatever their ownership share, so a minority officer can elect out just as a majority owner can. There is no 25 percent ownership threshold to opt out; the 25 percent figure in the statute only keeps the dual-capacity doctrine from undoing the exclusion of an officer who does own that much.
Are my regular employees covered if I have a policy?
Yes. W-2 employees are covered by the corporate policy. The include-or-exclude choice applies to owners and officers, not to rank-and-file staff.
Does incorporating protect me from an injured worker?
Not by itself. The corporate form shields shareholders from many debts, but an injured employee is a separate exposure. Without comp, the corporation can be sued for negligence as a non-subscriber.
What does exclusive remedy mean for my corporation?
If you carry comp, an injured employee's comp claim is generally their only remedy, so they cannot sue the company for negligence. That protection is a main reason closely held corporations subscribe even though it is optional.
Should owner-officers include or exclude themselves?
It depends on whether the owners do physical work and want their own injuries covered. Officers who mainly run the office often exclude themselves to lower premium, while an owner doing hands-on work may elect to stay covered.
Why Texas owners choose Morrow
- We shop the right market for you. Texas is the only state where workers' comp is optional for private employers, so Morrow helps you decide whether to subscribe or go without coverage, and places coverage fast through the competitive private market (or Texas Mutual, the insurer of last resort) when a client or public contract requires it.
- We catch pricing mistakes. Your price depends heavily on the category your work falls into for pricing (the class code). Put people in the wrong category and you overpay for years. We review your payroll and classifications before you buy.
- Proof of coverage, fast. Need a certificate (proof of coverage) for a general contractor or a landlord before Monday? We turn those around the same business day for most carriers.
- We help lower the score that drives your price. Insurers give you a score based on your past claims that raises or lowers your cost (the experience modification rate). We review it each year, flag errors, and connect you with return-to-work and safety resources that bring it down.
- Real people when a claim happens. When someone gets hurt, we stay involved through the life of the claim, not just at renewal.
Related Texas guides
Every Texas business is set up a little differently. These companion guides answer the same question for other situations, plus the national explainers behind the terms used here.
- Business insurance in Texas (start here)
- Workers comp: the owner's overview
- I own an LLC: do I need workers comp?
- I'm a sole proprietor: do I need workers comp?
- We're a partnership: do we need workers comp?
- We're a nonprofit: do we need workers comp?
- My workers are 1099: do I still need it?
- Only part-time or seasonal staff: do I need it?
- I only employ family: do I need workers comp?
- Remote or out-of-state staff: do I need coverage?
- What happens if I don't carry workers comp?
- How much does workers comp cost?
- How do I get workers comp (even if turned down)?
- What insurance do I need for a contractor license?
- Workers compensation insurance, explained
- What workers comp costs (national guide)
- Workers comp vs employers liability
- What workers comp does not cover
- Texas HVAC workers comp
This guide is general information, not legal advice. Texas rules and penalty amounts can change, so verify current requirements with Texas Department of Insurance, Division of Workers' Compensation (TDI-DWC) or a licensed advisor before you rely on them. Last updated: July 2026.