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Workers' Comp Basics for Agents

What is workers' compensation?

Workers' compensation is a commercial coverage that protects employers, their business and their employees from the consequences of an on-the job injury or illness.

A workers' comp policy ensures that employers have:

  • Legal protection: Employers with workers' comp have legal protection against potential lawsuits and related damages from an on-the job injury.
  • Medical and disability coverage: Workers' comp ensures that medical care and income benefits are paid for a compensable injury or illness.

Workers' comp vs. other coverages

In Texas, not all businesses are required to have workers' comp coverage, but there is no equivalent for the protection it provides. There are some businesses that are required to have it, such as public employers and businesses who contract with the government. Texas employers have three options when it comes to the question of whether to cover their business and people:

  • Workers' compensation insurance: Provides the best protection against the consequences of on-the-job injuries for both employers and their employees.
  • No insurance, also known as going bare: Operating without coverage leaves an employer to carry the financial responsibility for a workplace injury if they are found to be negligent. An employer is exposed to potential lawsuits and will be responsible for any legal fees.
  • Occupational accident insurance: Alternative policies may be appealing, but they offer limited coverage and don't provide employers with the legal protection or the resources to manage a claim. Your clients may not know the level of protection they need, and what they are receiving with alternative coverages.

See a side-by-side comparison of coverage

How premium is calculated

Workers' compensation premium is estimated based on what a business pays its employees, the type of work they do and the company's safety record. At the end of the policy period, most workers' comp companies ensure that the premium is correct with a final premium audit.

Agents play a vital role in making sure we have accurate information for their client and can quote appropriately. Here are a few pieces of information that you'll provide us:

You'll tell us how much payroll is provided to employees, based on the type of work they do. For instance, half of the wages your client pays might go to front office staff, while the other half goes to roofers. You'll choose class codes that correspond with the specific work they do.

Class codes help us assess risk, ensure consistency in premium calculations and creates a level playing field for all businesses in the workers' comp market. When you quote through Texas Mutual Online, we provide a list of class codes and the type of work they are associated with to help you determine the right one.

Learn more about class codes

To ensure that employers have the proper coverage for their business, we'll ask about their ownership type. The ownership structure affects how covered owners are rated for premium, as well as their ability to choose to be excluded from coverage:

  • Sole proprietorship: Includes coverage for the owner/sole proprietor*. Sole proprietors are rated using a fixed payroll, regardless of their wage, and can choose to be excluded from coverage.
  • Corporation: Includes coverage for Executive officers of the corporation. Officer payrolls are capped at $62,400 for premium rating. Officers owning 25% or more of the business can choose to be excluded from coverage. Officers with less than 25% equity ownership in the business can choose to be excluded from coverage with prior underwriting approval.
  • Limited liability company (LLC): Includes coverage to Members, managing members or executive officers. Payroll is capped at $62,400 for premium rating. Those owning 25% or more of the business can choose to be excluded from coverage. Those with less than 25% equity ownership in the business can choose to be excluded from coverage with prior underwriting approval.
  • General partnership: Includes coverage for all partners*. Partners also use a fixed payroll for premium rating, and can choose to be excluded from coverage.
  • Limited partnership (LP) & Limited liability partnership (LLP): Includes coverage for the General partner* and all limited partners*. All partners use a fixed payroll for premium rating, and can choose to be excluded from coverage.

*In Texas, spouses of sole proprietors and partners are considered included for coverage if they are active in the business, unless they choose to be excluded.

This information is a general guideline and should not be used as a comprehensive review or considered to be legal advice.

An endorsement allows you to change a workers' comp policy by either removing, adding or modifying coverage. Endorsements can be added when you quote, or added later as a policy change. These are the most common endorsements in workers' comp:

  • Owner, partner and officer exclusions
  • Waiver of subrogation
  • Designated Workplace Exclusions
  • Notice of material change
  • Longshore/Outer-continental Shelf
  • Maritime/Jones Act

Learn more about endorsements

Who does Texas Mutual cover?

With 43% of the workers’ comp market, we offer coverage for all types of Texas-based businesses, from small to enterprise level. We seek employers who prioritize safety, control their losses and take good care of their employees.

We cover Texas workers, and partner with Argonaut Insurance to cover workers in other states. Texas Mutual also offers coverage to the residual market in Texas.

Writing workers' comp in Texas

Any licensed agent can write with Texas Mutual. We are committed to making workers' comp work for you, so that you can easily and quickly take care of your clients.

Learn how to get started

Discounts for clients

When you quote with Texas Mutual, you may have the opportunity to choose programs that offer discounts to your clients:

  • Place your safe, responsible clients in industry safety groups, where they receive a discount and have the potential to earn a group dividend if the group’s losses are low.
  • Choose the health care network option for clients so that they receive a premium discount and have access to high quality care for injured workers.

How you can support your clients

We partner with agents to support policyholders throughout their policy life. Here’s how you can help them control their costs in the future:

  1. Help them understand differences in coverage
  2. Use marketing materials to share why Texas Mutual is a good choice
  3. Let them know what to expect with workers’ comp
  4. Guide them to cost-saving programs and free safety resources for policyholders
  5. Help them earn a dividend through safety and loyalty

Ready to get started?

FInd out how to register with Texas Mutual to start quoting business.

Workers' comp basics for employers

See what employers need to know about covering their business.