Ghost Policy

A ghost policy is a workers' compensation insurance policy issued to a sole proprietor or single-member LLC owner who formally excludes themselves from coverage. The policy generates a valid Certificate of Insurance (COI) to satisfy general contractor or client requirements — but the named insured has zero medical or wage-replacement protection if injured on the job.

Who this is for: Independent contractors and sole proprietors in construction, landscaping, or skilled trades who need proof of workers' comp to win contracts but cannot yet afford standard coverage.

TL;DR / Key Takeaways

• A ghost policy is a workers' comp policy with no covered employees — the owner opts out and no workers are on payroll.
• It exists solely to produce a COI; it pays nothing if you are hurt.
• Premiums are very low — typically $400–$1,200/year — because there is no real exposure being insured.
• Several states have banned or restricted ghost policies, especially in construction, due to fraud concerns.
• If you hire even one worker, a ghost policy does not cover them; you immediately need a standard policy.

What Exactly Is a Ghost Policy?

Workers' compensation insurance is priced on payroll. A sole proprietor who excludes themselves from a workers' comp policy has zero payroll subject to premium — hence the policy is nearly "free" (minimal expense) and insures no one, like a ghost. The insurer issues the policy and a corresponding COI, but the only named insured has signed an exclusion endorsement.

The term "ghost policy" is industry slang; the official mechanism is an owner/officer exclusion endorsement, permitted by most states for sole proprietors and certain corporate officers under state workers' compensation statutes administered by the relevant state workers' compensation board or commission, and governed by rates set through the National Council on Compensation Insurance (NCCI) or a state rating bureau.

Why Do Contractors Buy Ghost Policies?

General contractors (GCs) and property owners increasingly require every subcontractor to provide a COI showing workers' comp coverage before work begins. Their reason is self-protection: if an uninsured sub's worker is injured, the GC's own workers' comp carrier may be forced to cover the claim — and the GC's experience modification rate (EMR) takes the hit.

A sole proprietor with no employees faces a dilemma:

1. They legally may not need workers' comp for themselves in most states.
2. But the GC won't issue a purchase order without a COI.
3. A ghost policy solves the COI problem at minimal cost.

This is legal in most — but not all — states. The contractor simply cannot claim benefits under that policy.

Ghost Policy Cost by Trade (Illustrative Ranges)

Premiums depend on state, NCCI classification code, and minimum premium rules. These are illustrative ranges only and not a quote.

Note: Some states impose minimum premiums of $500–$1,500 regardless of payroll, which effectively sets the floor for ghost policy cost. Always get a state-specific quote.

States That Have Restricted or Banned Ghost Policies

Not every state permits ghost policies, and rules change. The following reflects general knowledge as of mid-2026 — always verify with your state DOI or a licensed agent.

[verify state] — State rules evolve rapidly. Confirm current eligibility with your state DOI or a licensed P&C broker before purchasing.

Ghost Policy vs. Standard Workers' Comp: Side-by-Side

How to Get a Ghost Policy in 5 Steps

1. Confirm your state permits it. Contact your state's Department of Insurance or a licensed broker. Florida, California, and New York have restrictions.
2. Verify you qualify. You must be a sole proprietor, single-member LLC, or a qualifying corporate officer with sufficient ownership percentage (often 10–25%, [verify state]).
3. Choose a carrier licensed in your state. Not all carriers write ghost or minimum-premium workers' comp policies; an independent broker can access multiple markets.
4. Complete the owner exclusion endorsement. You will sign a form acknowledging you are excluded from coverage. Keep a copy — GCs may ask for it.
5. Receive your COI and endorsement. The certificate lists your policy number and effective dates. Provide it to your GC before work begins.

Real-World Example: Framing Contractor in Georgia

Scenario (illustrative — not a guarantee of outcome):

Marco is a sole proprietor framing contractor in Atlanta, Georgia. He has no employees — it is just him on the job. A national homebuilder requires all subs to carry workers' comp before they receive a purchase order.

• Marco contacts Morrow; a broker confirms Georgia permits owner exclusions under NCCI rules.
• Marco's classification is 5645 (carpentry). The carrier quotes a ghost policy at a $650 annual minimum premium.
• Marco signs the owner exclusion endorsement. The policy is bound same-day.
• Morrow emails a COI to the homebuilder's vendor portal within 2 hours.
• Marco wins the contract. Six months later, he hires an apprentice. Morrow amends the policy immediately to add the new employee to payroll — the ghost policy is converted to a standard policy with an additional premium of roughly $1,800/year for one worker in code 5645 at Georgia rates.

Marco's ghost policy cost him $650 to unlock a $45,000 framing contract. The moment he hired help, the policy changed — he did not wait until his next audit.

Frequently Asked Questions

Is a ghost policy legal?

Yes, in most U.S. states. Ghost policies use a legitimate mechanism — the owner/officer exclusion endorsement — allowed by state workers' compensation statutes. However, several states (including Florida in construction and California) have restricted or effectively banned them. Misrepresenting your situation — for example, claiming to have no employees when you do — can constitute workers' comp fraud.

Does a ghost policy protect me if I get hurt?

No. That is the defining characteristic of a ghost policy: you are explicitly excluded from coverage. If you are injured on the job, the policy pays nothing toward your medical bills or lost income. Many sole proprietors purchase a separate occupational accident policy or health insurance to fill this gap.

Can I add employees to a ghost policy later?

Not without amending the policy. The moment you hire a W-2 employee or, in many states, a misclassified 1099 worker who functions as an employee, you must notify your insurer to add payroll. Workers' comp policies are subject to premium audit; if auditors find unreported workers, you face back-premium charges and potential policy cancellation.

How fast can I get a COI for a ghost policy?

With an independent agency like Morrow, a ghost policy can often be bound and a COI issued the same business day for standard trades and NCCI states. Restricted states or non-standard trades may take longer.

What happens if I get caught using a ghost policy where it is banned?

Using a ghost policy in a state that prohibits them, or misrepresenting coverage to a general contractor, can result in policy rescission, fines, and in egregious cases criminal prosecution for workers' comp fraud. The general contractor who relied on your COI may also face liability exposure.

Is a ghost policy the same as an officer exclusion policy?

Essentially yes. "Ghost policy" is the industry colloquial term; "officer exclusion" or "owner exclusion policy" is the more formal name. Both refer to a workers' compensation policy where the sole proprietor or qualifying officer has filed a statutory exclusion form.

Do I need a ghost policy if I'm in Texas?

Texas is a non-subscriber state — employers can legally opt out of the state workers' comp system entirely. Ghost policies as used in other states are not the typical mechanism in Texas. However, GCs in Texas may still require workers' comp or occupational accident coverage by contract. A licensed Texas broker can advise on the right structure.

Will my ghost policy affect my experience modification rate (EMR)?

A ghost policy with zero payroll and zero claims typically has no meaningful impact on your EMR because there are no reportable payroll units. However, once you convert to a standard policy with real employees, your EMR begins to build based on actual claims experience over the standard 3-year lookback period.

Why Morrow for Your Ghost Policy or Workers' Comp

1. Independent agency, multiple carriers. Morrow places coverage with numerous admitted workers' comp carriers across NCCI and state-specific bureau states, so we shop the minimum premium and find the most competitive ghost policy rate for your classification code.
2. Same-day COI turnaround. We know contractors live and die by the certificate. For standard ghost policies in permitted states, we target COI delivery within hours of binding — not days.
3. Trade-specific knowledge. Our brokers understand the difference between classification codes 5645, 5551, and 5190. We don't misclassify you and expose you to audit surprises.
4. Seamless conversion when you grow. When you hire your first employee, we amend the policy same-day and help you understand how payroll-based premium works so your annual audit is clean.
5. Real claims advocacy. If a standard policy claim arises after your ghost policy converts, Morrow advocates on your behalf with the carrier — we are not just a policy-vending machine.

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Related Pages

• Workers' Compensation Insurance — Complete Guide
• Certificate of Insurance (COI) — What It Is and How to Get One
• Workers' Comp for Contractors and Subcontractors
• How Much Does Workers' Comp Cost?
• Owner Officer Exclusion Endorsement Explained

About the Author

Jordan Kassel, CPCU, CIC — Commercial Lines Insurance Specialist with 12 years of experience placing workers' compensation and general liability coverage for contractors across the United States. Jordan holds the Chartered Property Casualty Underwriter (CPCU) and Certified Insurance Counselor (CIC) designations.

Published: June 2026 | Last updated: June 2026

Sources

• National Council on Compensation Insurance (NCCI) — Basic Manual, Classification Codes, and Owner/Officer Exclusion rules
• Florida Division of Workers' Compensation — Construction industry exemption guidance
• California Department of Industrial Relations — Workers' Compensation Coverage requirements
• New York Workers' Compensation Board — Officer exclusion regulations
• Texas Department of Insurance, Division of Workers' Compensation — Non-subscriber information
• Insurance Information Institute (III) — Workers' Compensation overview
• U.S. Department of Labor, OSHA — General industry safety standards (context for coverage triggers)