Ghost Insurance

Protecting Your Business

What is Ghost insurance?

Ghost insurance is a term that refers to workers’ compensation insurance that essentially covers no one; or, it could be said, a “ghost”.

Ghost policies are intended for self-employed single-person business owners who wish to forego worker’s comp coverage for themselves.

Ghost insurance can be a tempting economical option for self-employed people in certain circumstances.

Who is ghost insurance good for?

Ghost insurance is generally appropriate only for self-employed small business owners, sole proprietors and independent contractors who have no employees and no subcontractors. It can be a popular option among plumbers, electricians, cleaners, painters, paperhangers, HVAC workers, home inspectors, landscapers, and other self-employed one-person businesses.

Ghost insurance should not be used by businesses with a high risk for actual injury, and it is not available in every state.

How does a ghost policy work?

Self-employed small business owners are typically allowed, but not required, to purchase workers’ compensation insurance for themselves. They are, however, required to cover anyone who may be on their payroll.

Furthermore, they are often required to show proof of coverage, or a “Certificate of Insurance”, to potential clients as a qualification before beginning any new job.

If the owner does not wish to pay premiums on workers’ compensation insurance for himself or herself, one of the most economical options is to purchase an insurance policy that essentially covers no one.

Ghost policies are significantly less expensive than alternative options because they do not offer any tangible benefits to anybody.

Ghost policies can be subject to auditing to ensure that no employees are hired during the policy period. If the business owner should indeed hire an employee or pay a sub-contractor during the policy period, there could be hefty premiums or other consequences.

What are the major benefits of ghost insurance?

The biggest benefit of a ghost insurance policy is to allow a one-person business to show documentation of workers’ compensation insurance coverage at an extremely low cost.