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 [verify 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 [verify state-specific threshold].
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 [verify state].
- 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.
Ghost Policy vs. Standard Workers Comp: Side-by-Side
| 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 |
Real-World Example: Solo Plumber in Georgia
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 [verify state].
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 [verify state].
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.
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.
Get a Ghost Policy Quote
Ready to satisfy your GC's or licensing board's workers' comp requirement? Morrow can typically bind a ghost policy and issue your COI within one business day.
Morrow (Afthonea Inc., DBA Morrow) is an independent commercial insurance agency licensed to place coverage in [Morrow to confirm: list of licensed states]. Carriers placed through admitted and surplus lines markets [Morrow to confirm]. Client reviews available on [Morrow to confirm review platform].
Related Resources
- Workers Compensation Insurance for Contractors
- Do Sole Proprietors Need Workers Comp?
- Do I Need Workers Comp for 1099 Contractors?
- What Is a Certificate of Insurance — and How Fast Can I Get One?
- General Liability Insurance for Contractors
- Workers Comp Cost Guide for Small Contractors
Author: Written by the Morrow Insurance editorial team, reviewed by a licensed P&C insurance broker with commercial lines specialization. Published: June 2026. Last updated: June 2026.
Sources: - National Council on Compensation Insurance (NCCI) — class code definitions and minimum premium filings - State workers' compensation statutes and Departments of Insurance (varies by state; verify in your jurisdiction) - Insurance Information Institute (III) — workers' compensation overview - IRS Publication 15-A — determination of worker classification (employee vs. independent contractor) - NCCI Special Investigations Unit — ghost policy fraud guidance