Workers' comp ghost policy
A workers’ compensation ghost policy is an affordable way for small business owners to attain the proof of workers’ comp coverage they need to qualify for contracts, but it does not provide actual workers’ comp benefits.
What is a ghost workers' comp policy?
A ghost workers’ compensation policy is a type of policy designed for self-employed business owners who are exempt from the workers’ compensation requirements in their state—yet they still need to provide proof of coverage to qualify for contracts.
Workers’ compensation laws in most states require workers’ compensation coverage for businesses with one or more employees. Sole proprietors, contract workers, and the like are typically exempt from these requirements.
However, they might still need a certificate of insurance (COI) for workers’ comp coverage to show potential clients and qualify for contracts.
A ghost policy is a type of workers’ compensation insurance policy that meets this requirement for the minimum cost possible. It gives small business owners the proof of insurance they need, at a fraction of the price than if they bought a workers’ comp policy with actual benefits.
What does a ghost policy cover?
In a word—nothing. The benefit that a ghost insurance policy offers is the proof of coverage you receive, so you can qualify for contracts.
A full workers’ comp policy covers medical expenses and disability benefits for employees who suffer work-related injuries and illnesses.
A ghost workers’ comp policy offers your proof of coverage at a fraction of the price of buying a full policy, though it doesn’t include medical and wage benefits.
Keep in mind that if you buy a ghost workers’ comp policy, you may face an audit from your insurance carrier to verify that you don’t have any employees who would require workers’ comp benefits.
If your insurance company determines that you do have employees, it would require you to pay the full workers’ comp premium to offset its cost of providing these benefits. At the end of each policy period, your insurance company will ask you to verify that you don’t have any employees.
If you have a ghost policy but intend to hire employees, you should notify your insurance company. Even if an employee is part-time, you’ll likely have to provide workers’ comp coverage and pay the full premium rate.
What are the requirements for a ghost workers' comp policy?
Because a ghost workers’ comp policy offers proof of insurance with no real coverage, there are two simple requirements to obtain a ghost policy:
- You are a sole proprietor/business owner.
- You don’t have any employees, either full-time or part-time.
Who should get a ghost workers' compensation policy?
Ghost workers’ compensation policies are typically purchased by independent contractors and sole proprietors who need to show proof of workers’ compensation insurance to gain new clients and qualify for contracts, but don’t want to pay the insurance costs of a workers’ comp policy with benefits.
Most one-person businesses are exempt from workers’ comp insurance requirements in their state, so a ghost policy offers an affordable way to obtain proof of insurance without actual insurance coverage.
Here are a few examples of when you might need a ghost workers’ comp policy:
Your state requires proof of workers' comp coverage (even if you’re exempt)
Some state laws require proof of workers’ compensation insurance for every business, even if the business is exempt from actually carrying this coverage. A ghost policy can meet these state requirements.
You need proof of coverage for a contract or a job
A new client might ask to see your proof of workers’ comp coverage before hiring you for a job. A ghost policy gives you the proof you need to meet that requirement.
If you’re a subcontractor, you might need to show your proof of insurance to a general contractor. Because most general contractors and subcontractors carry their own business insurance, a ghost policy can give you the certificate you need to get the job.
You’re a sole proprietor, one-person LLC, or S corp
How much does a workers' compensation ghost policy cost?
How do I get a workers' comp ghost policy?
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