What insurance is required before hiring employees?

Required Insurance Before Hiring Employees in Texas

Before hiring employees in Texas, businesses must secure specific insurance coverage to comply with state operational requirements and protect the company and its workforce.

Workers' Compensation Insurance

Texas does not require most private employers to carry workers' compensation insurance. However, it is strongly recommended to provide coverage for workplace injuries and illnesses. If a business opts out, it must notify employees in writing that it does not carry workers' compensation.

Unemployment Insurance

Employers in Texas are required to pay into the Texas Unemployment Compensation Fund. This payroll tax funds unemployment benefits for eligible former employees. Registering with the Texas Workforce Commission (TWC) and reporting wages regularly is necessary to maintain compliance.

Employer Liability and Other Insurance

While not mandatory, general liability insurance and employer liability insurance are operationally useful to protect against claims related to employee injuries or third-party damages. Additionally, businesses with commercial vehicles must have appropriate auto insurance.

Additional Operational Considerations

• Employee Classification: Correctly classify workers as employees or independent contractors to ensure proper insurance coverage and tax reporting.
• Payroll Setup: Integrate insurance tax payments with payroll systems to streamline compliance and reporting.
• Recordkeeping: Maintain documentation of all insurance policies, employee notifications, and state filings.
• Compliance Monitoring: Stay updated on Texas workforce insurance requirements as of 2026 to adjust coverage and reporting accordingly.