New Business Insurance in Texas
Coverage Follows Events, Not the Calendar
You don't need everything on day one. You need specific coverage at specific moments, and most of those moments arrive before you open.
| When this happens | You need |
|---|---|
| You form the entity | Nothing yet, but every policy after this must name the entity exactly as registered |
| You sign a lease | General liability at the limits the lease demands, with the landlord as additional insured. Most landlords won't hand over keys without the certificate |
| You buy equipment or inventory | Business personal property, and coverage for tenant improvements you paid for |
| You hire your first employee | A workers' comp decision, and EPLI becomes worth pricing |
| You put a vehicle in service | Commercial auto. Your personal policy excludes business use |
| You take your first payment | Cyber, if you process cards or hold customer data |
| You sign your first client contract | Whatever that contract requires, which is usually more than you carry |
What Your Lease Will Actually Require
Whatever its insurance exhibit says. That's the section or attachment of the lease that lists the coverage, the limits, and the wording the landlord wants, and it's the part to read before you sign rather than after.
Additional insured. The exhibit names the parties to be added to your general liability policy as additional insureds, and each name has to match the lease exactly. That status comes from an endorsement on the policy, not from the certificate: a certificate can't confer "new or additional rights beyond what the referenced policy or any executed endorsement of insurance provides," under Insurance Code § 1811.153. The ISO endorsement for a landlord is CG 20 11, Additional Insured – Managers Or Lessors Of Premises. If the landlord wants proof beyond the certificate, ask for a copy of the endorsement itself; TDI says chapter 1811 "does not prohibit an agent or insurer from providing a copy of the policy or endorsements."
Waiver of subrogation. A waiver of subrogation gives up your insurer's right to recover from the landlord after it pays a claim. On general liability it's ISO endorsement CG 24 04, Waiver Of Transfer Of Rights Of Recovery Against Others To Us. Check which of your policies the exhibit wants it on.
What the certificate has to show. The exhibit will ask for a certificate as proof, and Texas law limits what one can say. It "may not contain a reference to a legal or insurance requirement contained in a contract other than the underlying contract of insurance" under § 1811.154, so it shows the policies, limits, and endorsements you carry rather than a statement that you meet the lease. If the lease asks for notice of cancellation, that right has to come from the policy or an endorsement under § 1811.155. More on what a Texas certificate can and can't do.
Sources: Tex. Ins. Code § 1811.153 · Tex. Ins. Code § 1811.154 · Tex. Ins. Code § 1811.155 · TDI, Certificates of Insurance FAQ
During Build-Out, the Exposure Is Different
If you're renovating before you open, the gap between lease signing and opening day has its own requirements. Your GC and every sub need their own certificates naming you and the landlord, and the materials and work in progress need builder's risk or an installation floater — your eventual property policy doesn't reach backward to cover a build-out that burned before you took occupancy.
The Named Insured Has to Match the Entity
The named insured on the policy has to be the entity you registered. If you registered an LLC but the policy names you personally, or names a trade name you never filed, the carrier has a clean argument at claim time that the insured and the business aren't the same party.
Match the policy to the entity exactly as it's registered, and add any assumed name you actually use. Update it the day you change the structure.
Workers' Comp in Texas: Optional, with Strings
In Texas, a private employer can choose whether to carry workers' compensation: under Labor Code § 406.002(a), an employer "may elect to obtain workers' compensation insurance coverage," except public employers and as otherwise provided by law. Going without it carries filing requirements.
As a non-subscriber you must file a notice of no coverage with the Texas Department of Insurance's Division of Workers' Compensation through its Employer E-File system, notify employees in writing, post notice at the workplace, and file annually. You also give up the common-law defenses comp provides, which means an injured employee can sue you directly for negligence.
Two cases where it isn't optional: state or local government building and construction contracts require it for every employee on the project, and a private contract or lease can require it regardless of what state law allows.
Sources: Tex. Labor Code § 406.002 · TDI Division of Workers' Compensation, non-subscriber notices and Employer E-File · Tex. Labor Code § 406.033 · Tex. Labor Code § 406.096
What Most Small Businesses Actually Buy
For a retail shop, café, office, or small service business, the starting point is usually a business owner's policy — general liability and property bundled.
| Coverage | What it does |
|---|---|
| General liability | Customer injuries, damage you cause to others' property, advertising injury. The coverage every lease and contract asks for |
| Business personal property | Your equipment, inventory, and furnishings |
| Tenant improvements | The build-out you paid for in a space you don't own. Your landlord's policy doesn't cover it |
| Business interruption | Income while you're closed after a covered loss. The piece new owners skip and later wish they hadn't |
| Commercial auto | Any vehicle used for the business, including the one in your driveway |
| Hired and non-owned auto | Employees running errands in their own cars |
| Workers' comp | Employee injuries, plus the legal protection non-subscribers give up |
| Cyber | Card data and customer records. Required by some processor agreements |
| Professional liability | If you give advice or deliver a professional service |
| EPLI | Hiring, firing, and harassment claims. Price it once you pass a handful of employees |
Three First-Year Traps
Your homeowners policy does not cover a home business. Most exclude business property above a token limit and exclude business liability entirely. A client tripping on your porch is not a homeowners claim.
Your premium is an estimate until the audit. New policies get rated on projected payroll and revenue, then audited after the term. Beat your projections and you'll owe the difference in one bill. Budget for it rather than being surprised by it.
Calling workers 1099 doesn't make them contractors. If an auditor or a court decides they were employees, you owe the comp premium and you're exposed on the injury. The test turns on how the work is actually controlled. A written agreement matters too, but it isn't sufficient on its own.
Sources: Tex. Labor Code § 406.121 · Tex. Labor Code § 406.122
What a Quote Actually Needs from You
- Legal entity name as registered, plus any assumed name
- What the business does, in plain language, and where
- The lease, if you have one, including the insurance exhibit
- Projected revenue and payroll for the first twelve months
- Equipment, inventory, and build-out values
- Vehicles, and who drives them
- Any contract that specifies insurance requirements
Questions People Ask
What insurance does a new business in Texas need first?
You don't need everything on day one. You need specific coverage at specific moments, and most of those moments arrive before you open. Most first policies get bought for one reason: the landlord won't hand over keys without a certificate.
How much liability insurance does a commercial lease require?
Whatever its insurance exhibit says. Read the limits it names and the endorsements it asks for before you sign.
Why did my landlord reject my certificate?
Check the names first: each one on the certificate has to match the lease exactly. Next, additional insured status has to come from an endorsement on your policy — a certificate can't confer it, under Insurance Code § 1811.153. And the certificate can't state that you meet the lease; § 1811.154 doesn't allow a certificate to reference a requirement in another contract.
Is workers' comp required for a small business in Texas?
In Texas, a private employer can choose whether to carry workers' compensation: under Labor Code § 406.002(a), an employer "may elect to obtain workers' compensation insurance coverage," except public employers and as otherwise provided by law. Going without it carries filing requirements. Two cases where it isn't optional: state or local government building and construction contracts require it for every employee on the project, and a private contract or lease can require it regardless of what state law allows.
Does my homeowners policy cover a home business?
Your homeowners policy does not cover a home business. Most exclude business property above a token limit and exclude business liability entirely. A client tripping on your porch is not a homeowners claim.