Ghost Policy (Workers Comp)

A ghost policy is a stripped-down workers' compensation policy purchased by a business owner with no employees — typically a sole proprietor, single-member LLC, or partner who has legally excluded themselves from coverage. Because owners in most states can opt out of covering their own injuries, the policy carries essentially zero reportable payroll and is written at the carrier's minimum premium (often a few hundred dollars a year). The nickname "ghost" reflects that the policy has almost no substance: there are no covered employees, so it will rarely if ever pay a claim. What it does provide is a real, verifiable policy number and the ability to issue a certificate of insurance naming a client as certificate holder.

Ghost policies matter because many general contractors, staffing clients, and municipalities require proof of workers' comp before they will hire even a one-person subcontractor. Without it, the hiring party's own comp premium audit may charge them for the sub's payroll as if the sub were an uninsured employee. A ghost policy lets a genuine solo operator meet that contractual gate at the lowest possible cost while remaining honest about having no staff. The premium is driven by the carrier's minimum and the owner's NCCI class code, not by payroll, since the owner is excluded and reports $0 employee wages. Buyers should understand what they are not getting: because the owner is excluded, an on-the-job injury to that owner is not covered by the ghost policy and must be addressed through separate health, disability, or (where allowed) an owner-inclusion election that converts it into a real, payroll-rated policy.

A practical nuance trips up many buyers: the ghost policy stays "ghost" only as long as the business truly has no employees or uncovered subcontractors. If the owner hires even one worker — or pays an uninsured 1099 subcontractor whose payroll gets swept in at audit — the carrier will assess additional premium retroactively, potentially turning a $300 policy into thousands of dollars owed. Ghost policies also differ from a formal exclusion filing: a state-filed sole-proprietor exclusion removes the owner from coverage, whereas the ghost policy is the vehicle that documents insurance for third parties. Owners who genuinely want their own injuries covered must instead elect inclusion and accept payroll-based rating. Treat a ghost policy as a compliance and certificate tool, not as protection for the owner.