A Business Without Business Insurance in Texas
Legally Starting Without Insurance
Yes, in Texas, you can legally start a business without business insurance. The state does not require all businesses to carry insurance at the time of formation. You can register your business entity (LLC, sole proprietorship, corporation, etc.), obtain an Employer Identification Number (EIN), and even begin operations without showing proof of coverage. However, depending on your industry and activities, specific types of insurance may eventually become mandatory.
When Insurance Becomes Required
Certain professions and business activities in Texas are regulated and require insurance coverage. For example, if you hire employees, Texas does not mandate workers’ compensation insurance, but if you choose not to carry it, you lose legal protection from employee injury lawsuits. Similarly, general contractors may be required by clients to carry general liability insurance. Businesses using company vehicles must have commercial auto insurance under state law.
In regulated industries like healthcare, legal, or financial services, professional liability or malpractice insurance may be necessary for licensing or compliance.
Risks of Operating Without Insurance
While not required for all businesses, operating without insurance exposes you to significant risks. If a customer sues you for an injury on your property or a client claims you caused financial harm through your services, the legal costs could be devastating. Additionally, property damage, theft, natural disasters, or employee injuries can result in financial loss that is hard to recover from without coverage.
Small business insurance, such as general liability, commercial property, or a business owner’s policy (BOP), helps protect against these risks and provides peace of mind.
Benefits of Getting Insured Early
Even though it’s not required to start, getting insured early in your business journey can strengthen your credibility and relationships with clients, lenders, and partners. Some vendors and landlords will require proof of insurance before doing business. Insurance also protects your personal assets if your business is sued, especially if you're a sole proprietor or in a partnership.
Conclusion
While Texas doesn’t make business insurance mandatory across the board, skipping it can be a costly gamble. Assess your industry’s requirements, weigh potential liabilities, and strongly consider investing in at least basic coverage. Doing so protects your business, supports growth, and builds trust with customers and collaborators.