A workers’ comp ghost policy is a type of workers’ compensation insurance for self-employed individuals or business owners without employees. It provides no coverage for injuries, as the policyholder excludes themselves from coverage or employs no workers. Instead, it serves as a certificate of insurance to meet legal or contractual requirements.

How a Workers’ Comp Ghost Policy Works

A workers’ comp ghost policy works as a certificate of compliance rather than an active insurance plan that covers injuries or illnesses. When a business owner or sole proprietor purchases this type of policy, they usually opt to exclude themselves from coverage. Since the policyholder doesn't employ anyone, there's no employee coverage, and the policy remains inactive, hence the term "ghost."

Although it provides no actual coverage, it's still considered a valid form of workers’ comp insurance. For instance, contractors or sole proprietors may need proof of insurance to meet legal or contractual requirements. This policy satisfies those requirements, even though it doesn't provide financial protection for workplace injuries.

Why Workers’ Comp Ghost Policies Exist

A workers’ comp ghost policy is often needed to meet legal or contractual requirements. Many states require businesses to carry workers’ compensation insurance, even without employees, to comply with regulations or fulfill contracts. A ghost policy provides proof of coverage without the cost of a standard workers’ comp plan.

Hiring companies also benefit from ghost policies. For instance, general contractors may require subcontractors to provide a certificate of insurance, such as a ghost policy, to avoid liability if the subcontractor or their workers are injured.

Drawbacks of a Workers’ Comp Ghost Policy

While a workman's comp ghost policy can be helpful, it has its disadvantages:

  • No insurance coverage: A ghost workers’ comp policy doesn't cover the policyholder's or employees' injuries.
  • Limited scope: Since it only serves as proof of compliance, a ghost policy insurance offers no financial protection. Business owners seeking coverage for themselves or others will need a traditional workers’ compensation policy.
  • Compliance risks: If you hire employees while holding a workers’ comp ghost policy and don't report it, you may face penalties for noncompliance, including fines or cancellation of your policy.
  • Contractual limitations: Some contracts may not accept a ghost workers comp policy, especially if the hiring entity requires full compensation coverage.
  • State-specific restrictions: Some states may have specific rules regarding ghost policies, limiting their use in certain industries or scenarios.

Who Should Consider a Workers’ Comp Ghost Policy?

Below are the scenarios and business types where a ghost workers’ comp policy is most suitable:

  • Sole proprietors without employees: Independent contractors or sole proprietors who don't have employees often use ghost insurance policies to meet legal requirements. This is especially true in industries where proof of workers’ compensation insurance is mandatory, even if the business has no staff.
  • Subcontractors working for general contractors: Contractors often need proof of a workers’ comp ghost policy from their subcontractors to avoid being liable for injuries.
  • Cost-conscious business owners: It's an affordable option for businesses needing insurance documentation but without employees.
  • Seasonal or part-time business owners: Owners with short-term projects may find a ghost work comp policy an affordable solution for meeting temporary compliance needs.

When Is a Ghost Policy Inappropriate?

A workers’ comp ghost policy isn’t suitable for every business or situation. Here are some situations where it may not be the right choice:

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    Employers with active employees

    Businesses with employees require full workers’ compensation insurance, not a ghost comp.

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    Risk-heavy industries

    High-risk industries like construction or manufacturing often require comprehensive insurance, making a ghost insurance policy insufficient.

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    Misrepresentation of business size

    Attempting to pass off a ghost workers' compensation policy as full coverage can result in penalties. Insurers and regulators may view this as fraudulent, resulting in fines, policy cancellation or legal action.

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    Businesses seeking financial protection

    A ghost insurance policy doesn't provide financial protection for workplace injuries.

How Much a Workers’ Comp Ghost Policy Costs

The cost of a workers’ comp ghost policy is generally lower than that of standard workers’ compensation insurance, typically ranging from $1,000 to $2,000 annually. This cost mainly covers administrative fees and minimum premiums, as the policy doesn't provide actual coverage for workplace injuries. 

Several factors affect the price of a ghost workers’ compensation policy. The type of business matters, as industries with higher risks may face slightly higher premiums. Insurance companies also have different methods for setting prices, which can influence costs. Other considerations can also impact the price, like whether the business owner excludes themselves from coverage or how long the policy will last.

How to Get a Ghost Policy

Follow these steps to efficiently get a ghost insurance policy:

  1. 1

    Research state requirements

    Before applying for a ghost workers’ comp policy, understand the regulations in your state. Each state has specific rules regarding workers' compensation that determine whether a ghost policy is permitted or required.

  2. 2

    Evaluate your business needs

    Assess whether a ghost workers' compensation policy aligns with your operational needs. If you're a sole proprietor without employees, a ghost policy may be the right fit for meeting legal and contractual obligations. However, if you plan to hire workers or operate in a high-risk industry, consider the limitations of this policy type.

  3. 3

    Compare insurance providers

    Not all insurers offer ghost insurance policies, so find an experienced provider. Look for top insurance carriers specializing in workers’ compensation insurance, especially those with positive reviews and competitive rates.

  4. 4

    Provide accurate business information

    Insurers require specific details about your business, such as its structure, location and industry classification, when applying for a ghost policy. Be transparent about your operations and confirm that you don't have employees.

  5. 5

    Pay the required premium

    After completing your application, pay the premium to activate your ghost insurance policy.

  6. 6

    Maintain and update your policy

    Once you have your ghost workers’ comp policy, keep it up to date. Notify your insurer immediately if your business operations change, such as when hiring employees.

FAQ: Workers’ Comp Ghost Policy

What is a ghost policy?

Are ghost policies legal?

How much is a ghost policy?

Who needs a workers’ comp ghost policy?

Does a ghost policy cover workplace injuries?

About Mark Fitzpatrick


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Mark Fitzpatrick, a Licensed Property and Casualty Insurance Producer, is MoneyGeek's resident Personal Finance Expert. With over five years of experience analyzing the insurance market, he conducts original research and creates tailored content for all types of buyers. His insights have been featured in publications like CNBC, NBC News and Mashable.

Fitzpatrick holds a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He's also a five-time Jeopardy champion!

Passionate about economics and insurance, he aims to promote transparency in financial topics and empower others to make confident money decisions.


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