What Workers Compensation Is
Workers compensation is a state-regulated insurance program that pays medical expenses, lost wages, disability benefits, and death benefits for employees injured on the job. The benefits are defined by state law, not negotiated. In exchange for these defined benefits, employees give up the right to sue the employer for the injury (the "exclusive remedy" provision). For employers, workers comp provides predictable cost and legal protection. For employees, workers comp provides predictable benefits without having to prove employer fault.
Texas: The Non-Mandatory State
Texas is one of only two US states (the other is South Dakota) where private employers are not required to carry workers compensation. Texas employers can choose between three options:
- Subscriber. The employer carries workers comp through a Texas-licensed insurer. Employees receive defined workers comp benefits and cannot sue the employer for the injury.
- Non-subscriber. The employer chooses not to carry workers comp. Employees can sue the employer for negligence and pursue full damages. Many non-subscribers carry a private "occupational injury" policy that pays defined benefits to employees.
- Self-insurance. Larger employers can apply for state approval to self-insure their workers comp obligations. Requires significant cash reserves and state oversight.
The choice is consequential. Subscribers pay higher premiums but have limited liability for employee injuries. Non-subscribers save premium but face direct lawsuit exposure if employees are injured.
Why Most Major Shippers Require Workers Comp
Most major shippers, brokers, and prime contractors require workers comp regardless of Texas law:
- Predictable benefit structure. Workers comp benefits are defined by state regulation. Shippers know what employees receive if injured at their facility.
- Indirect liability protection. Workers comp provides the exclusive remedy bar that prevents employees from suing both the employer and the shipper they were working for.
- Industry standard. Workers comp is required in 48 of 50 states. National shipper insurance requirements typically include it without distinguishing state.
- Audit and compliance. Many shippers conduct insurance audits of carriers. Workers comp is one of the easiest items to verify (state filings are public).
Trucking operators who plan to work with major retailers, manufacturers, large 3PLs, or government contracts almost always need workers comp regardless of Texas non-subscriber status.
What Workers Comp Covers
- Medical expenses. Doctor visits, hospital stays, surgery, prescriptions, and rehabilitation for work-related injuries.
- Lost wages. Temporary total disability (TTD) and temporary partial disability (TPD) benefits for time missed from work.
- Permanent disability. Permanent total or partial disability benefits for lasting impairments.
- Death benefits. Survivor benefits to family members if a work-related injury causes death.
- Vocational rehabilitation. Retraining benefits if the injury prevents return to the prior occupation.
Texas workers comp benefits are governed by the Texas Workers Compensation Act and administered by the Texas Department of Insurance, Division of Workers Compensation. Specific benefit amounts are set by state regulation and updated periodically.
How Much Does Workers Comp Cost?
Workers comp premium is calculated by multiplying the employee's annual payroll by a class code rate, then adjusting for the employer's experience modifier (mod):
Premium = Payroll x (Class Code Rate / 100) x Experience Modifier
Common class codes for trucking:
- 7228 (Trucking, mail or parcel delivery, long distance hauling). Over-the-road trucking. One of the higher-rated classes in Texas; ask your agent for the current filed rate.
- 7229 (Local trucking, including municipal). Local hauling. Rated slightly below over-the-road in most filings.
- 7230 (Trucking, oil field equipment). Oilfield service trucking. Higher rates due to elevated risk.
- 7231 (Mail, parcel, or package delivery). Specific class for mail and parcel.
- 7232 (Hauling explosives, ammunition). Specialty class with higher rates.
The experience modifier reflects the employer's loss history. New employers start at 1.0. Employers with better-than-average loss history can drop below 1.0 (a discount). Employers with worse-than-average loss history can exceed 1.0 (a surcharge). Mod factors typically range from 0.65 to 1.5 in commercial trucking.
A worked example of the formula, using round numbers rather than a quoted rate. Assume a single driver earning $60,000 per year, class code 7228, an illustrative rate of $7 per $100 of payroll, and an experience mod of 1.0:
- Premium = $60,000 x ($7 / $100) x 1.0 = $4,200 per year
Costs vary based on individual factors. Actual rates depend on the carrier, class codes, payroll, mod factor, and other underwriting variables.
Workers Comp vs. Occupational Accident Insurance
Operators who do not qualify for workers comp (notably leased owner-operators classified as independent contractors) often carry occupational accident insurance instead:
| Feature | Workers Compensation | Occupational Accident |
|---|---|---|
| Eligibility | Employees | Independent contractors and employees |
| Regulation | State regulated | Private insurance, less regulated |
| Benefit level | Defined by state law | Defined by policy |
| Lawsuit shield | Yes (exclusive remedy) | No |
| Typical cost | Class code x payroll | Priced per person per year; typically a fraction of workers comp for an employee |
| Shipper acceptance | Universally accepted | Sometimes accepted; varies by shipper |
For more details on occupational accident, see our occupational accident insurance overview.
How to Get Workers Compensation Quotes
Workers comp is usually written separately from your commercial trucking insurance, often through a different agent or carrier specializing in workers comp. Some agents handle both.
Information you will need:
- Number of employees and their job classifications
- Annual payroll for each class code
- Operating profile (over-the-road, local, oilfield, etc.)
- Loss history (Texas DWC claim records for past 3 to 5 years)
- Experience modifier (Mod) if you have one
- Safety program documentation
Find an agent who writes commercial trucking coverage. Most can quote workers comp alongside your other policies or refer you to a specialty workers comp agent.