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May 5, 2026
Workers compensation requirements range from 1 employee (PA, MD, KY) to 5 (TN) to not required at all (TX). Learn what each state mandates and how to keep your premium under control.
A single workplace injury can cost tens of thousands of dollars in medical bills, lost wages, and legal exposure. Workers compensation insurance protects your employees when they get hurt on the job — and protects your business from the financial and legal consequences that follow. In most states, carrying it is not optional once you hire employees.
Dragon Insurance Services helps small and mid-sized businesses across Pennsylvania, Texas, Virginia, Maryland, Ohio, Tennessee, and Kentucky find workers compensation coverage that meets their legal obligations and fits their payroll. Explore our workers compensation coverage options or read on for a full guide.
Workers compensation laws vary significantly across the 7 states we serve. Here is what the law requires in each:
| State | When Required | Key Notes |
|---|---|---|
| Pennsylvania | 1 or more employees | Required for all employers with at least one W-2 employee. Certain domestic workers and agricultural workers may be exempt. Sole proprietors and partners are not automatically covered but may elect to include themselves. |
| Texas | Not required for most private employers | Texas is the only state that does not mandate workers comp for most private employers. However, businesses without it (called "non-subscribers") lose important legal protections and face full tort liability. Government contractors and certain industries may be required to carry it. |
| Virginia | 3 or more regular employees | Required when you regularly employ 3 or more workers. In construction, the threshold is 2 or more employees. Seasonal and part-time employees can count toward the threshold. |
| Maryland | 1 or more employees | Required for employers with at least one employee — including part-time workers. Corporate officers are covered unless they formally elect to exclude themselves. |
| Ohio | 1 or more employees (state-managed system) | Ohio operates a state-managed monopoly workers comp system through the Ohio Bureau of Workers' Compensation (BWC). Employers must purchase coverage through the BWC or qualify as a self-insured employer — private carriers are not available for Ohio workers comp. |
| Tennessee | 5 or more employees | Required when you employ 5 or more workers. For construction and coal mining businesses, the threshold drops to 1 employee. Agricultural workers have separate rules. |
| Kentucky | 1 or more employees | Required for employers with at least one employee. Agricultural labor has some exemptions. Corporate officers are generally included unless they elect out. |
Workers compensation laws are subject to legislative change. This table reflects our best understanding of current requirements. Always verify with your state's workers compensation board or a licensed insurance agent. We serve as an agent for private market carriers — Ohio employers must work directly with the Ohio BWC for workers compensation.
Texas non-subscribers: understand your risk
While Texas does not require most private employers to carry workers comp, businesses that opt out — called non-subscribers — lose the ability to raise common law defenses (assumption of risk, contributory negligence) if an injured employee sues. This means a non-subscriber faces full tort liability and no cap on damages. Many Texas businesses find the cost of voluntary workers comp coverage is far less than the risk of operating without it.
Workers compensation insurance provides two primary protections:
Part 1: Workers Compensation Benefits
Covers the statutory benefits your injured employees are entitled to under state law — regardless of fault. This includes medical treatment for work-related injuries and illnesses, temporary disability payments (typically a portion of their weekly wages), permanent disability benefits if the injury has lasting effects, vocational rehabilitation if the employee cannot return to their former role, and death benefits for surviving dependents.
Part 2: Employers Liability
Protects your business if an injured employee sues you outside of the workers compensation system — for example, if they argue your gross negligence caused their injury, or if a family member files a third-party lawsuit. Standard employers liability limits are typically $100,000 per occurrence, $500,000 policy limit, $100,000 per employee for disease — though higher limits are available.
Workers comp premiums are calculated based on several factors:
| Factor | How It Affects Your Rate |
|---|---|
| Job classification codes | Each job type has an assigned rate per $100 of payroll. Roofing, excavation, and electrical work carry much higher rates than clerical or office work. Getting classifications right is critical. |
| Total payroll | Premium is calculated as a rate per $100 of payroll. As your payroll grows, your premium grows proportionally. |
| Experience modification factor (Mod) | A multiplier based on your claims history vs. industry average. A Mod of 1.0 is average. Below 1.0 means you pay less than average; above 1.0 means you pay more. Fewer claims = lower Mod = significant savings over time. |
| State | Base rates vary by state. Pennsylvania, Maryland, and Kentucky tend to have higher base rates than some neighboring states. |
Misclassifying employees as independent contractors
If you classify workers as 1099 contractors but they actually function as employees under state law, you may be found liable for their injuries and face penalties. State definitions of "employee" vary — when in doubt, consult a licensed agent or attorney.
Not reporting claims quickly
Delayed claim reporting consistently leads to higher claim costs — and higher costs hit your experience modification factor at renewal. Establish a clear internal process for reporting any workplace injury immediately.
Skipping audit preparation
Workers comp policies are based on estimated payroll at the start and audited at year-end. Businesses that do not keep clean payroll records often face unexpected audit charges — or miss credits they are entitled to.
We work with small and mid-sized employers across six of our seven states (note: Ohio employers must obtain workers comp through the state BWC) to find the right coverage at the right price — and we help you avoid the classification and audit mistakes that cost businesses money every year.
Have your estimated annual payroll and job types ready — we can usually get a quote started quickly. Call us or fill out our online form.
Visit us: 1525 Cedar Cliff Dr STE 202, Camp Hill, PA 17011
Serving employers across PA, TX, VA, MD, TN, and KY. Ohio employers should contact the Ohio Bureau of Workers' Compensation (BWC) directly.
Dragon Insurance Services LLC is a licensed independent insurance agency. Workers compensation laws and requirements are set by each state's legislature and regulatory agencies and are subject to change. The information above reflects our understanding of current law and should not be construed as legal advice. Ohio workers compensation is administered exclusively through the Ohio Bureau of Workers' Compensation (BWC) — Dragon Insurance does not place Ohio workers comp coverage. Coverage availability, rates, and terms vary by carrier, state, industry classification, and payroll. Contact us for a personalized quote.
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