Texas Workers' Compensation Insurance | The Woodlands & Spring TX | Wayne Lilly Insurance
Wayne Lilly Insurance · The Woodlands & Spring, TX
Texas Workers' Compensation Insurance
Between class codes, audits, experience modifiers, and subcontractor exposure, small mistakes in workers' comp become expensive fast. We help you get it right before a problem finds you.
⚠️ Texas is the only state that does not require most private employers to carry workers' compensation — but opting out carries serious legal risk.
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Only state that makes workers' comp optional for private employers
13+
Years reviewing Texas workers' comp policies for business owners
$0
Cost to have your current policy reviewed for class code errors
Our Review Process
What We Look at in Every Workers' Comp Policy
Most business owners have never had their workers' comp policy reviewed by an independent agent. Here's what we examine — and what we commonly find.
Employee Classification Codes
Each job type carries a specific class code that directly sets your rate. Incorrect codes — which are common — mean you may be overpaying or, worse, underinsured at claim time.
⚑ An unusually low premium isn't always a deal. It may signal that class codes don't match the actual work being performed — a major audit risk.
Experience Modifier (Ex-Mod)
Your experience modifier compares your claims history to similar businesses and adjusts your premium up or down. Understanding and managing your mod is one of the best ways to control long-term cost.
⚑ A mod above 1.0 means you're paying more than the industry average. We help you understand why — and what can be done about it.
Subcontractor & 1099 Exposure
Using subcontractors without verifying their own coverage creates serious gaps. During an audit or claim, misclassified workers can become your liability — often without warning.
⚑ Many business owners don't learn about this exposure until an audit results in a significant additional premium charge.
Payroll Accuracy & Audit Prep
Workers' comp premiums are calculated on payroll. If reported payroll at policy inception doesn't match actual payroll at audit, you'll face either a refund or — much more commonly — an additional charge.
⚑ We walk clients through how to document payroll properly before the audit, not after.
Non-Subscriber Risk Assessment
Texas allows businesses to opt out of the workers' comp system — but doing so eliminates key liability protections and shifts the burden of proof to the employer in injury litigation.
⚑ Non-subscribers cannot use the "employee negligence" defense in lawsuits. We help you understand the full picture before making this decision.
Coverage Adequacy Review
We compare your current limits, endorsements, and carrier options to ensure your policy is truly aligned with how your business operates — not just how it looked on paper at inception.
⚑ As your business grows or changes, your workers' comp policy needs to keep pace. We review at renewal every year.
Texas-Specific Context
Why Texas Workers' Comp Is Different From Every Other State
The Non-Subscriber System
Texas is the only state that gives private employers a genuine choice: subscribe to the workers' compensation system, or opt out and become a "non-subscriber." This flexibility is unusual — and often misunderstood.
Subscriber businesses that carry workers' comp receive protection from most employee injury lawsuits. Their employees receive defined medical and wage benefits, regardless of fault. Claims go through the workers' comp system — not the courts.
Non-subscriber businesses assume direct responsibility for all workplace injuries and face the full court system if an employee sues. Critically, they cannot use common-law defenses like contributory negligence or assumption of risk.
What Non-Subscription Actually Means
You are directly responsible for all medical costs and lost wages from workplace injuries
You cannot use the negligence of the employee as a legal defense
You cannot claim the employee assumed the risk of their job
A single serious injury can result in uncapped civil liability
Certain contracts (government, construction) require proof of coverage
Some general contractors require subcontractors to carry workers' comp before allowing them on a job site
Understanding Your Premium
How Workers' Comp Premiums Are Built
Your premium isn't a flat fee — it's a formula. Understanding each component is the key to controlling your cost over time.
01
Payroll × Class Code Rate
Your base premium starts with total payroll multiplied by the rate assigned to each job classification code. Rates vary dramatically by job type and industry risk level.
02
Experience Modifier Applied
If your business qualifies (typically $5,000+ in annual premium), your ex-mod is applied. A 1.2 mod adds 20% to your base. A 0.8 mod saves you 20%. Your claims history drives this number.
03
Schedule Credits & Debits
Carriers can apply additional credits or debits based on safety programs, loss control measures, and the quality of your operations. This is often negotiable — especially through an independent agent.
04
Annual Audit Adjustment
At year end, your carrier audits your actual payroll. If payroll grew, you'll owe additional premium. If it shrank, you'll receive a refund. Accurate payroll estimates prevent large true-ups.
Industries We Serve
Workers' Comp Coverage Across Texas Industries
We work with business owners across a wide range of industries in The Woodlands, Spring, Klein, and the greater Houston area.
Construction & Contractors
Staffing & Temp Agencies
Healthcare & Home Care
Trucking & Transportation
Landscaping & Lawn Care
Restaurants & Food Service
Technology & Professional Services
Manufacturing & Warehousing
Common Questions
Texas Workers' Comp — Answered Plainly
These are the questions we hear most often from Texas business owners — many of which directly affect their premium and liability exposure.
Texas does not require most private employers to carry workers' compensation insurance — it is optional for the majority of businesses. However, certain contractors working on government projects, and some construction subcontractors, may be required to carry it by contract.
Important Note
Opting out doesn't eliminate your responsibility — it shifts it. Non-subscribers face unlimited civil liability for workplace injuries and lose access to common-law defenses. The burden of proof in a lawsuit falls heavily on the employer, not the employee.
A non-subscriber is a Texas business that chooses not to participate in the workers' compensation system. Non-subscribers must notify both the Texas Department of Insurance and their employees of this status. They assume full financial responsibility for workplace injuries.
Important Note
Non-subscribers cannot use negligence-based defenses that subscriber businesses rely on. If an employee is injured and sues, the injured worker only needs to show the employer was negligent — they don't have to prove fault-free status themselves.
Your premium is based on three primary factors: (1) total payroll per $100 earned, (2) the class code rate assigned to each type of work your employees do, and (3) your experience modifier, which adjusts the base rate up or down based on your historical claims compared to similar businesses in your industry.
Important Note
Correct classification codes are critical. A policy that seems unusually inexpensive may reflect incorrect class codes — which creates major exposure at audit time when actual payroll and job types are verified. This is one of the most common and costly mistakes we find during reviews.
Your experience modifier (ex-mod) is a multiplier assigned by your state rating bureau that compares your actual losses to what would be expected for a business of your size and type. A 1.0 mod is average. Above 1.0, you pay more. Below 1.0, you pay less.
Important Note
Your mod is calculated using a 3-year rolling window of claims data, excluding the most recent year. This means a bad year today will affect your premiums for the next 3 years. Proactive claims management — including return-to-work programs and prompt injury reporting — is one of the most effective ways to protect your mod over time.
Not automatically. If a subcontractor does not have their own workers' comp coverage, their payroll may be included in your audit — meaning you could be charged premium for work you thought was separate. Worse, if they are injured on your job site, you may face liability.
Important Note
Always collect Certificates of Insurance from every subcontractor before work begins. If a sub cannot provide proof of their own workers' comp, assume their payroll will be added to your audit and plan accordingly. We help clients build a simple COI tracking process to prevent audit surprises.
Workers' comp policies are written on estimated payroll at the start of the policy year. At the end of the year, the carrier audits your actual payroll, class codes, and subcontractor documentation. If actual payroll was higher than estimated, you'll owe additional premium. If lower, you receive a credit or refund.
Important Note
Auditors are paid to find unclassified payroll and miscategorized workers. Being prepared — with accurate records, subcontractor COIs, and properly separated job descriptions — is the difference between a clean audit and an unexpected bill. We prepare clients before the auditor shows up, not after.
Workers' comp covers injuries to your own employees. General liability covers third-party claims — customers, vendors, or the public who are injured due to your business operations. These two policies serve different purposes and are often both required.
Important Note
Many general liability policies explicitly exclude employee injuries. If a business operates without workers' comp and tries to use their GL policy to cover an employee injury claim, it will likely be denied — leaving the business fully exposed.
Ready for a Free Workers' Comp Review?
We review your current policy, check classification codes, assess audit exposure, and compare options across multiple carriers — at no cost, no obligation.