Ghost Policy (Workers Comp)
Also known as: ghost workers comp policy, minimum premium comp policy, if-any policy, shell comp policy
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.
Real-world scenario
Marcos Rivera runs Rivera Drywall LLC, a one-man finishing operation in Tampa, Florida. A general contractor offers him an $85,000 interior subcontract but won't let him on the jobsite without a certificate of insurance showing active workers' compensation. Because Marcos has no employees and legally excludes himself as the LLC owner, his agent writes a "ghost policy" — a minimum-premium WC policy carrying $1,000,000 each-accident, $1,000,000 policy, and $500,000 disease-each-employee employers liability limits, but essentially $0 of reportable payroll.
The annual premium is the state minimum of $1,200, with a $300 deposit and a $150 policy fee at binding. A 25% minimum-earned provision means $300 is non-refundable even if he cancels early. The COI is issued the same day and the contract proceeds. So far, so clean.
Two months in, Marcos rushes a deadline and pays a day laborer $1,800 in cash over three days — never reporting the payroll or the correct NCCI class code. The laborer falls off a bench scaffold. The ER bill is $12,000 and lost-wage indemnity runs another $9,000, a $21,000 claim the carrier denies because no employee payroll existed on the policy. Marcos is personally exposed: he spends $18,000 on defense and settles for $60,000. Reporting that worker up front would have cost roughly $2,400 in additional premium — a brutal trade.
How it affects your premium
Ghost policies are priced off a floor, not off payroll, so the pricing levers look different from a standard WC policy:
- State minimum premium: Every carrier sets a filed minimum (often $800–$1,400) that a zero-payroll policy defaults to, regardless of how little exposure exists.
- Governing class code: The owner's declared trade still sets the base rate; roofing or framing codes carry higher minimums than clerical or handyman codes.
- Employers liability limits: Bumping employers liability above the standard $100K/$500K/$100K to meet a $1M contract requirement adds an increased-limits charge.
- Minimum-earned percentage: A 25%–35% minimum-earned provision means early cancellation still costs real money.
- State fund vs. voluntary carrier: In some states only the assigned-risk pool or state fund will write a no-employee risk, and their minimums run higher.
- Policy fees and surcharges: Flat policy fees, stamping/surplus charges, and state assessments stack on top of the minimum premium.
- Premium audit true-up: If any payroll surfaces at audit, the policy re-rates off actual exposure and the minimum evaporates.
Common misconceptions
Myth: A ghost policy covers the business owner if they get hurt on the job.
Reality:
It does the opposite — the owner is excluded from coverage, which is the entire reason the premium is a bare minimum. An injured owner has no WC medical or indemnity benefits and needs their own health or disability coverage.
Myth: A ghost policy lets me quietly hire a helper or two and they're automatically covered.
Reality:
No. A ghost policy reports zero payroll, so any employee you pay is an uncovered exposure. The premium audit will discover the payroll and re-rate the policy, and any claim in the meantime can be denied.
Myth: Because the certificate shows a $1,000,000 limit, my client and I are both protected.
Reality:
Those limits only apply to the employers liability section for actual covered employees. With no covered payroll, there is nothing for those limits to pay on.
Frequently asked questions
Why would a general contractor accept a ghost policy from a sub with no employees?
The GC's real goal is to stop your workers from filing claims against their policy and inflating their experience mod. A ghost policy produces a valid certificate of insurance confirming you carry WC, satisfying the contract even though you employ only yourself.
How much does a ghost policy cost?
Most fall between roughly $800 and $1,400 per year — the carrier's filed minimum premium — plus policy fees. The exact number depends on your state and governing class code, not on payroll, since there is none to rate.
Can I add employees to a ghost policy later?
Yes, but you must notify your agent and report the payroll immediately so it can be rated. Once you have covered employees it stops being a ghost policy, and the year-end premium audit will bill you for the actual exposure.
Does a ghost policy satisfy a certificate of insurance requirement?
Generally yes — it produces a standard ACORD certificate showing active workers' comp. Just confirm the hiring party isn't also demanding that they be listed on it or that owner coverage be included, which a ghost policy won't provide.
What happens at audit if I truly had no payroll all year?
The policy stays at its minimum premium and there's nothing to true up. If any subcontractor or casual labor payroll surfaces without proof of their own coverage, the auditor can add it as reportable exposure and re-rate the policy.
Sources cited
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