A ghost workers comp policy is a workers' compensation policy issued to a sole proprietor or single-member LLC where the owner formally elects to exclude themselves from coverage, leaving the policy with no covered employees and zero payroll. It satisfies a contractor's license board or GC's insurance requirement, proof of workers' comp, without covering anyone. Who this is for: Self-employed contractors who work alone and must show a certificate of insurance (COI) to win bids, get licensed, or enter job sites.
TL;DR: Key Takeaways
- A ghost policy issues a real workers' comp COI but excludes the owner/sole proprietor from coverage, so no benefits are payable if they are hurt on the job.
- It costs significantly less than a standard policy because payroll is $0, premiums typically run $400–$1,200 per year depending on state, trade, and carrier minimums.
- Most states allow sole proprietors and single-member LLCs to waive workers' comp coverage for themselves, but rules and forms vary by state.
- Ghost policies are legitimate when used correctly; misuse, such as hiring employees while maintaining a ghost policy, is insurance fraud and can result in criminal charges and fines.
- If you ever hire employees or statutory employees, you must convert to a standard workers' comp policy immediately.
Why Would a Contractor Need a Ghost Policy?
General contractors (GCs) and property managers routinely require every subcontractor on a job site to carry workers' compensation. The requirement exists to protect the GC from a claim where a sub's injured worker sues the GC as the "upstream employer" under various state statutes. State contractor licensing boards, for example, those in Florida, Texas, California, and Georgia, often require proof of workers' comp as a condition of license issuance or renewal.
The problem: workers' comp for a sole proprietor who has no employees is, in most states, optional. But "optional" and "not required by the license board or GC" are two different things. A ghost policy bridges the gap. It proves to the GC or board that a policy exists, while the owner-exclusion endorsement formally removes the owner from covered payroll, keeping premiums near the state or carrier minimum.
How Does a Ghost Workers Comp Policy Work? (Step by Step)
- Determine eligibility. Confirm your state allows sole proprietors or single-member LLCs to exclude themselves. Most do; exceptions and procedures vary.
- Apply as a sole proprietor or single-member LLC. You must have zero W-2 employees. The policy is voided if employees are discovered at audit.
- Execute the owner-exclusion election. Your carrier or state workers' comp bureau provides a form, sometimes called an "exclusion form" or "officer exclusion." Sign and file it with the carrier. This is what triggers the "ghost" status.
- Pay the minimum premium. With $0 payroll, premium is calculated at the carrier's state-filed minimum. Expect $400–$1,200 annually for most trades [see table below].
- Receive your certificate of insurance (COI). The COI shows an active workers' comp policy number. You present it to GCs, licensing boards, or property owners.
- Comply with annual audit. At policy year-end, a payroll audit confirms $0 payroll. If you hired anyone during the year, you owe additional premium, and may face fraud investigation.
- Convert if you hire. The moment you hire a W-2 employee or a 1099 worker who qualifies as a statutory employee under your state's law, you must add them to a standard workers' comp policy.
What Does a Ghost Policy Cover, and NOT Cover?
| Item | Covered? | Notes |
|---|---|---|
| Owner's on-the-job injury (medical / lost wages) | No | Owner formally excluded from coverage |
| Owner's occupational disease | No | Same exclusion applies |
| W-2 employees (if hired during policy year) | No | Policy must be converted; coverage does not apply retroactively |
| 1099 subcontractors (statutory employees) | No | Separate sub-contractor coverage or owner's own policy required |
| Third-party bodily injury on job site | No | General liability covers this, separate policy |
| Employer's liability (Part Two) | No | No covered employees = no exposure; Part Two is effectively dormant |
| Certificate / proof of workers' comp for licensing | Yes | This is the entire purpose |
Key distinction: A ghost policy is not a "cheap workers' comp policy." It is a policy that proves the legal existence of a workers' comp contract while providing zero wage-replacement or medical benefits to the owner. The owner takes on 100% of their own injury risk.
What Does a Ghost Workers Comp Policy Cost?
Premiums vary by state, class code, and carrier minimum. The table below shows illustrative annual premium ranges for sole proprietors with $0 payroll
| Trade / Class Code | Typical State Min. Premium (Annual) | Notes |
|---|---|---|
| General contractor (5403 / 5645) | $600–$1,200 | Higher-hazard class codes carry higher minimums |
| Painting contractor (5474) | $500–$1,000 | |
| Plumbing (5183) | $500–$900 | |
| Landscaping / lawn service (0042) | $400–$850 | |
| Electrical (5190) | $550–$1,100 | |
| Cleaning / janitorial (9015) | $400–$700 | Lower-hazard, lower minimum |
| Handyman (9015 / 5610) | $400–$800 | Class code depends on dominant work |
Ranges are illustrative. Actual premiums depend on your state's filed minimum, carrier, and any state surcharges. Some states set minimum premiums via NCCI; others use independent bureaus.
Should I Choose Ghost Policy or Standard Workers Comp Coverage?
| Feature | Ghost Policy | Standard Workers Comp |
|---|---|---|
| Who is covered | No one (owner excluded) | Owner (if elected) + all employees |
| Payroll basis for premium | $0 | Actual or estimated payroll |
| Annual premium (solo contractor) | $400–$1,200 | Varies; scales with payroll |
| Owner's injury benefit | None | Medical + wage replacement (if owner elected in) |
| Valid for licensing / GC COI | Yes | Yes |
| Can add employees | No, must convert | Yes |
| Fraud risk if misused | High | N/A |
What Does a Real-World Solo Plumber in Georgia Scenario Look Like?
The following is an illustrative scenario, not a guarantee of coverage or premium.
Carlos runs a one-man plumbing business in Atlanta, Georgia as a sole proprietor. He subcontracts for a large GC that requires every sub to carry workers' comp. Carlos has no employees and works entirely alone.
Carlos's broker places a ghost workers' comp policy using NCCI class code 5183 (plumbing) at Georgia's carrier-filed minimum of approximately $650 per year. Carlos signs a sole-proprietor exclusion form, which is filed with the carrier. He receives a COI listing the GC as certificate holder within 24 hours.
At year-end audit, Carlos reports $0 payroll. Premium is confirmed at $650. His license and GC relationship remain intact.
Had Carlos hired a helper, even an occasional 1099 laborer the state deemed a statutory employee, and failed to report it, he would face: (a) retroactive premium owed, (b) potential fraud charges, and (c) uncovered liability if the helper was injured. The ghost policy would not have paid the helper's claim.
Is a Ghost Workers Comp Policy Legal?
Yes, when used as intended. Ghost policies are a recognized product category, and carriers file them with state departments of insurance. The legal foundation is each state's statutory right of a sole proprietor or corporate officer to opt out of workers' comp coverage for themselves.
What is not legal
- Maintaining a ghost policy while employing workers (W-2 or statutory 1099)
- Using a ghost policy to circumvent premium audit
- Misrepresenting a ghost policy as full workers' comp coverage to an injured party
State fraud bureaus and NCCI's Special Investigations Unit actively investigate ghost policy misuse. Penalties can include policy cancellation, back-premium assessment, fines, and criminal prosecution.
FAQ
Q: Can an LLC use a ghost workers comp policy? Single-member LLCs can typically obtain a ghost policy using the managing member's exclusion election, similar to a sole proprietor. Multi-member LLCs may have different rules; check your state's workers' comp statute.
Q: Will a GC accept a ghost policy COI? Most GCs will. The COI shows a valid policy number and effective date. Some large GCs or project owners may ask for additional verification; be transparent that you are a sole operator with an owner exclusion.
Q: What happens if I get hurt while on a ghost policy? You have no workers' comp benefits. You would need to rely on personal health insurance, disability insurance, or accident/occupational accident coverage you purchased separately. This is a significant personal risk to weigh before choosing a ghost policy.
Q: Is a ghost policy the same as an occupational accident policy? No. An occupational accident (occ-acc) policy is a voluntary accident policy that pays the owner limited medical and disability benefits. It does not issue a workers' comp COI. Some contractors carry both: a ghost policy for the COI and an occ-acc policy for personal protection.
Q: Can I get a ghost policy in Texas? Texas does not require private employers to carry workers' comp (it is a "non-subscriber" state). Sole proprietors in Texas may still obtain a ghost policy to satisfy a GC's certificate requirement, but the rules differ; consult a Texas-licensed agent.
Q: How quickly can I get a COI on a ghost policy? With a competent independent agent, same-day to next-business-day is typical for clean applications.
Q: What class code applies to my ghost policy? The class code matches your primary trade (plumbing, electrical, carpentry, etc.): same as any workers' comp policy. The code affects the minimum premium; it does not determine coverage, since no one is covered.
Q: Do I need a ghost policy if I already have general liability? General liability (GL) covers third-party bodily injury and property damage, not worker injuries. They are separate coverages. Many GCs require both GL and workers' comp, so a ghost policy and a GL policy together cover the typical COI checklist for a solo sub.
Q: What is a ghost workers comp policy? A: A ghost workers comp policy is a workers' compensation policy issued to a sole proprietor or single-member LLC where the owner formally elects to exclude themselves from coverage. This leaves the policy with no covered employees and zero payroll. It allows self-employed contractors to obtain a certificate of insurance (COI) proving workers' comp coverage exists, satisfying a general contractor's or licensing board's requirement, without actually covering anyone. Premiums are near the carrier minimum, typically $400–$1,200 per year.
Q: Will a general contractor accept a ghost policy COI? A: Most general contractors will accept a ghost policy COI. The certificate shows a valid workers' comp policy number and effective date. Some large GCs or project owners may ask for additional verification; be transparent that you are a sole operator with an owner exclusion on file.
Q: What happens if I get hurt while on a ghost workers comp policy? A: You receive no workers' comp benefits. Because you formally excluded yourself from coverage, the policy pays no medical bills or wage replacement for your own injuries. You would need personal health insurance, disability insurance, or a separate occupational accident policy for personal protection.
Q: Is a ghost workers comp policy the same as an occupational accident policy? A: No. An occupational accident (occ-acc) policy is a voluntary accident policy that pays the owner limited medical and disability benefits if injured on the job. It does not issue a workers' comp certificate of insurance. Many solo contractors carry both: a ghost workers' comp policy for the COI requirement and an occ-acc policy for their own personal protection.
Q: How much does a ghost workers comp policy cost? A: Annual premiums for ghost workers' comp policies typically range from $400 to $1,200 depending on state, trade class code, and carrier minimum. Premiums are at or near the state-filed minimum because payroll is $0. Higher-hazard trades such as general contracting or electrical work generally carry higher minimums than lower-hazard trades like cleaning or janitorial.
Q: Do I need a ghost policy if I already have general liability insurance? A: General liability insurance and workers' compensation are separate coverages. General liability covers third-party bodily injury and property damage; it does not cover worker injuries. Most general contractors require both a general liability policy and a workers' comp policy (even a ghost policy) from subcontractors. Carrying both satisfies the typical COI checklist for a solo subcontractor.
Why Morrow for Your Ghost Workers Comp Policy
- Independent agency, multiple carriers. Morrow is not captive to one carrier. We shop ghost-policy minimums across admitted workers' comp markets to find the lowest compliant premium for your state and trade.
- Fast COI turnaround. We know you often need proof of coverage to start a job tomorrow. For qualifying applicants, we can deliver a certificate same-day.
- Trade specialization. We place coverage for contractors across the full trades spectrum, plumbers, electricians, painters, landscapers, general contractors, and more, and know which class codes apply to your work.
- Conversion support when you grow. When you hire your first employee, we proactively help you convert to a standard policy before an audit creates a problem, protecting you from uninsured-worker liability.
- Real claims advocacy. If a coverage question arises, for example, if a GC disputes your COI status. You have a licensed advocate, not a call center.