Study guide
6.5 Texas Workers' Compensation Statutes (Texas Labor Code 401-409)
Claims Adjuster License Exam Study Guide Exam
Track your progress as you read
Finished sections get a check mark.
1 Chapter 1: Insurance Principles & Legal Foundations
1.1 Fundamentals of Risk & Insurance Mechanics 1.2 Insurance Contract Law & Policy Structure 1.3 State Regulation, Licensing & Commissioner Authority 1.4 Unfair Trade Practices & Claims Settlement Regulations 1.5 Policy Cancellation, Nonrenewal, Vacancy & Endorsements 1.6 Frequently Tested Insurance Terms: Binders, Salvage, Crime Perils & Other-Insurance Clauses
2 Chapter 2: Property Insurance Coverages & Loss Valuation
2.1 Dwelling Policy Forms & Coverage Provisions 2.2 Homeowners Policy Forms & Endorsements 2.3 Commercial Property, Inland Marine & Specialty Coverage 2.4 Perils, Causes of Loss & Exclusions 2.5 Valuation Methods, Coinsurance & Loss Settlement Formulae 2.6 Standard Fire Policy, Ocean Marine & Marine Concepts
3 Chapter 3: Casualty & Liability Insurance
3.1 Principles of Legal Liability & Negligence 3.2 Personal Auto Policy (PAP) Coverage Mechanics 3.3 Commercial General Liability (CGL) Coverages & Triggers 3.4 Commercial Auto, Specialty Casualty & Umbrella Liability
4 Chapter 4: Workers' Compensation Insurance
4.1 Statutory Framework, Exclusivity & Covered Claims 4.2 Workers' Compensation Benefit Categories & Disability Types 4.3 Employer's Liability & Multi-State Coverage
5 Chapter 5: Claims Adjusting Mechanics, Settlement & Ethics
5.1 Initial Claim Handling, Scoping & Loss Investigation 5.2 Loss Reserves, Claim Evaluation & Dispute Resolution 5.3 Adjuster Professional Ethics, Fair Practices & Fraud Detection
6 Chapter 6: Texas Statutes & Rules Pertinent to Property & Casualty Adjusting
6.1 Texas Adjuster Licensing Requirements (TIC 4101) 6.2 Texas Commissioner of Insurance: Authority, Examinations & Penalties 6.3 Texas Unfair Trade & Marketing Practices (TIC 541, 542.151-.154) 6.4 Texas Unfair Claims Settlement Practices & Prompt Payment (TIC 542) 6.5 Texas Workers' Compensation Statutes (Texas Labor Code 401-409) 6.6 Texas License Renewal, Continuing Education & Designated Home State Maintenance
6.5 Texas Workers' Compensation Statutes (Texas Labor Code 401-409)
Key Takeaways Explain This Topic AI
Texas doesn't require most private employers to have workers' compensation; employers who opt out (non-subscribers) lose the exclusive remedy defense and may be sued in tort (Texas Labor Code 406.003, 406.033).
Texas Temporary Income Benefits (TIBs) are paid at 70% of the employee's average weekly wage (AWW) for employees earning $10 or more per hour—not the 66 2/3% used in many other states (Texas Labor Code 408.061-.062; TAC 129.3).
The Texas waiting period is 7 days; if disability exceeds 14 days, the waiting period is paid retroactively (Texas Labor Code 408.082).
Impairment Income Benefits (IIBs) are 70% of AWW paid for 3 weeks per 1% of whole-body impairment assigned after Maximum Medical Improvement (Texas Labor Code 408.121, 408.126).
Last updated: November 2026
Texas Workers' Compensation Statutes (Texas Labor Code 401-409)
Quick Answer: Texas workers' compensation is administered by the TDI Division of Workers' Compensation under Texas Labor Code Title 5 (Chapters 401-419) . Two Texas features dominate the exam: Texas doesn't require most private employers to have workers' compensation , and Texas income benefits use 70% of AWW , not the 66⅔% common elsewhere.
The All-Lines exam tests the Texas Labor Code by section number. This section covers the definitions (401.011-.013), who is covered (406.091), obtaining coverage and employer election (406.003), the wage and waiting-period rules (408.041-.047, 408.082), compensable injuries (406.032, 408.181), benefits (409.021-.024, 408.004/.041/.101/.150/.181), and the Subsequent Injury Fund (403.007).
The Texas Non-Subscriber System (Labor Code 406.003, 406.033)
Texas doesn't require most private employers to have workers' compensation. An employer who chooses not to subscribe is called a non-subscriber .
Consequences of Non-Subscription
The employer loses the exclusive remedy defense —the injured employee may sue the employer in tort for the full extent of damages.
The employer is barred from asserting the common-law defenses of contributory negligence, assumption of risk, and the fellow-servant rule (Texas Labor Code 406.033).
This makes non-subscription legally perilous, which is why most large Texas employers do subscribe.
Public employers (cities, state agencies) and some construction contractors are still required to carry WC—only private employers have the option.
Who Is an Employee? (Labor Code 401.011-.013, 406.091)
Texas defines "employee" broadly but excludes independent contractors, certain domestic workers, and casual laborers. The statutory test focuses on the employer's right of control over the details of the work.
Obtaining Coverage (Labor Code 401.022, 406.003, 406.033)
A subscribing employer obtains coverage by:
- Purchasing a policy from a private insurer, OR
- Self-insuring (only large employers who meet TDI-DWC financial standards and obtain a certificate), OR
Participating in a group self-insurance pool .
- Wage and Benefit Computation
- Average Weekly Wage (AWW) — Labor Code 408.041-.047
The AWW is computed from the employee's earnings during the 13 weeks preceding the injury (or a representative period). Benefits are a percentage of AWW, subject to state maximum and minimum weekly rates set annually under Labor Code 408.061.
Temporary Income Benefits (TIBs) — Labor Code 408.101-.105
TIBs replace lost wages while the employee is temporarily unable to work. Texas pays 70% of AWW for employees earning $10 or more per hour (TAC 129.3). For employees earning less than $10/hour , Texas pays 75% for the first 26 weeks , then 70% thereafter—a higher rate to protect low-wage workers.
The Waiting Period — Labor Code 408.082
Texas imposes a 7-day waiting period before income benefits begin. If the disability lasts more than 14 days , the waiting period is paid retroactively —the employee is reimbursed for the first 7 days.
Disability duration Waiting period paid?
- 1-7 days No (no income benefits for first 7 days)
- 8-14 days No (waiting period not yet retroactively triggered)
- More than 14 days Yes—first 7 days paid retroactively
- Impairment Income Benefits (IIBs) — Labor Code 408.121, 408.126
Once the employee reaches Maximum Medical Improvement (MMI) , a designated doctor assigns a whole-body impairment rating using the AMA Guides. IIBs are paid at 70% of AWW for 3 weeks per 1% of impairment . A 10% rating yields 30 weeks of IIBs.
Supplemental Income Benefits (SIBs) — Labor Code 408.142-.144
After IIBs exhaust, an employee with an impairment rating of 15% or more who cannot return to work may receive SIBs, paid monthly, calculated quarterly.
Lifetime Income Benefits (LIBs) — Labor Code 408.061
Catastrophic injuries (paralysis, blindness, amputation, severe brain injury) qualify for LIBs: 70% of AWW plus a 3% annual cost-of-living adjustment , payable for life.
Death and Burial Benefits — Labor Code 408.181-.187
Surviving spouses and minor children receive death benefits (capped at 100% of the state average weekly wage), and burial benefits up to a statutory amount.
Medical Benefits — Labor Code 408.004
Medical care is furnished without dollar limit, time limit, deductible, or copayment for the compensable injury.
Compensable Injuries (Labor Code 401.011, 406.032, 408.181)
An injury must arise out of and in the course and scope of employment . Texas excludes injuries resulting from the employee's intoxication, willful attempt to injure self or another, horseplay, or act of God (Labor Code 406.032).
The Subsequent Injury Fund (Labor Code 403.007)
Texas maintains a Subsequent Injury Fund to encourage employers to hire workers with pre-existing impairments. When a subsequent injury combines with a prior impairment to produce a greater total disability, the Fund pays a portion of the additional benefits.
Exclusive Remedy — Labor Code 408.001
For subscribing employers, WC is the exclusive remedy : the employee cannot sue the employer in tort for a covered injury. Non-subscribers lose this shield. This is the grand bargain the Texas system enforces.
Exam Trap
*A question will give an AWW and ask for the Texas TIB rate. The Texas answer is 70% of AWW (for employees earning $10+/hour), NOT the 66⅔% used in most other states. If the exam gives a Texas fact pattern, apply 70%.