What Is a Ghost Workers’ Compensation Policy?
A ghost policy, sometimes called a minimum premium or sole proprietor workers’ compensation policy, is crafted for one-person businesses where the owner is excluded from coverage, and there are no employees. In essence, it offers no actual benefits—it exists purely to provide proof of insurance.InsureonTechInsuranceSimply Business
Why Ghost Policies Exist—and Who Uses Them
- Contract Requirements: Many clients or general contractors require a Certificate of Insurance (COI) before awarding a job—even if a subcontractor is exempt from required workers’ comp coverage. A ghost policy satisfies that requirement.InsureonTechInsuranceSimply Business
- State Proof-of-Coverage Mandates: Some states mandate proof of workers’ comp coverage for all registered businesses, regardless of whether the owner is exempt. A ghost policy meets that criteria affordably.Insureonccisbonds.com
- Cost Efficiency: With zero payroll (aside from the owner), insurers charge only the minimum premium, typically around $1,000 to $2,000 annually.InsureonTechInsurance
How Ghost Policies Work
- You’re the sole owner and have no employees.
- The policy excludes you from “covered persons,” so in the event of injury, no benefits are paid.InsureonWorkers Compensation ShopSimply Business
- You receive a Certificate of Insurance to present to clients.InsureonPogo Insurance
- Annual audits confirm you haven’t hired employees or subcontractors—violations may result in retroactive premiums or even cancellation.InsureonTechInsurancePogo Insurance
State-by-State Legality: Not Everywhere Is It Allowed
Ghost policies are legally permitted in some states, including:
- Examples: Alabama, Florida, Georgia, Illinois, North Carolina, South Carolina, Virginia, Washington, and West Virginia.InsureonTechInsurance
In contrast, other states prohibit ghost policies, such as:
- Examples: California and Colorado.TechInsurancepinnacol.comccisbonds.com
California has recently tightened rules—SB 216, rolling out through January 2026, mandates that all licensed contractors carry workers’ comp, regardless of employee count.ccisbonds.com
Risks & Limitations of Ghost Policies
| Limitation / Risk | Description |
|---|---|
| No Real Coverage | If you (or future employees) get injured, you won’t be covered.pinnacol.comWorkers Compensation ShopCerity |
| Audit Exposure | Hiring someone or using uninsured subs without notifying your insurer can lead to fines or retroactive premiums.InsureonTechInsuranceWorkers Compensation Shop |
| Reputational & Legal Risk | Some businesses/GCs might view ghost policies as cutting corners, potentially harming your credibility.pinnacol.com |
| Changing Regulations | Laws evolve—particularly in areas like California or Colorado. Ghost policies could become disallowed in your state.pinnacol.comccisbonds.comTechInsurance |
Is a Ghost Policy Right for You?
Consider a ghost policy if:
- You’re a sole proprietor, one-person LLC, or S-Corp with no employees.
- You need to provide proof of workers’ comp to win contracts or meet client requirements.
- Your state permits ghost policies.
- You understand you’re not protected by benefits in the event of injury.
But think twice if:
- You plan to hire employees or subs during the year.
- You’re in a state where ghost policies are prohibited (e.g., California, Colorado).
- You prefer having real wage and medical coverage for yourself—even if it costs more.
Final Reminder: Always Do Your Homework
- Check state regulations, especially if you’re outside Upstate or working across state lines.
- Consult an insurance agent to confirm whether your state allows ghost policies—and if they fit your business profile.
- Reassess annually, especially before renewing or changing your coverage, to ensure compliance and adequacy.
In Summary
A Ghost Workers’ Compensation Policy can be a savvy solution for solo professionals needing to prove insurance without paying high premiums. But it’s not a substitute for real protection. Make an informed choice by evaluating:
- Your exception status
- State laws
- Contract requirements
- Your personal risk tolerance