Workers Compensation Ghost Policies

Written By Charlotte Insurance on April 7, 2015. It has 0 comments.

Inexpensive Charlotte workers compensation insurance coverage sounds like a dream, doesn’t it? For small business owners with no employees, who are typically exempt from workers compensation, it can be a lifesaver – or at the very least, a business-saver.

Ghost policies are a type of workers comp coverage that satisfies mandated requirements for single proprietors or self-employed business owners. When a job requires coverage but you are exempt from needing workers compensation, ghost policies step in to fill the gap at a lower cost. The only thing ghost policies do is fill a requirement for a company or government entity that might be hiring contractors. They don’t provide any actual coverage.


A ghost policy should only be used for self-employed business owners meeting specific criteria:

  • No employees or subcontractors – or plans to hire any.
  • No payments to subcontractors.
  • No payroll except for yourself as the owner.

Ghost policies are often less expensive than the typical workers compensation coverage and are written to meet the minimum requirements of insurance coverage for the company hiring you to complete a job. Your policy should be written to include automatic coverage for any employees or uninsured subcontractors you may need to hire during the coverage period of your policy.

Be aware that ghost policies are often audited and if you hire employees or subcontractors under the policy, you’ll be charged higher premium rates because of the higher payroll at the conclusion of the audit. If there’s a possibility you’ll need to hire subcontractors or additional employees for a job, you’ll be better off with a standard workers compensation plan.


Ghost policies are often used to cover short term laborers. Because of this, some larger companies will attempt to make all of the employees on their payroll appear to be seasonal. They do this to purchase ghost policies as a cost-saver. This is a type of fraud and will backfire in the end.

Companies who purchase ghost policies experience more audits and will pay higher premiums at the conclusion of an audit. Employees who are injured on the job and are covered by a ghost policy may still have the ability to hold the employer liable for the cost of their injuries or illness as well. Without proper coverage, a company will pay much more in the end than if they’d simply purchased the right workers comp policy.

If you’re the owner of a small business with no other employees, and you simply need to show coverage in order to be considered for a bigger job, a ghost policy may be for you. But if you have subcontractors working for you or you anticipate the need to hire employees, discuss other workers comp options with your insurance agent. It may cost you more up front, but it’s better to have the right coverage for you and your business than deal with the surprise total at the end of an audit.

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