Workers’ Compensation Insurance: Ghost Policies for Businesses Without Employees

Brenna Lemmon

Workers' Compensation Underwriting Director

May 13, 2020

Business Owners Without Employees
It is a common practice for a customer to ask their service providers and contractors to furnish a Workers’ Compensation certificate of insurance as a prerequisite for doing business with them. Although businesses without employees are not statutorily required to carry Work Comp coverage, they may still encounter situations where prospective clients require them to carry this coverage in order to do business with them.  Below is an overview of what these business owners need to know about obtaining Workers’ Compensation insurance.

What is a Ghost Policy?
A ghost policy is a type of Work Comp policy that is issued for a business where the owners are excluded and there are no additional employees of the business.  Below are the basic criteria for obtaining a ghost policy.

  • All business owners and officers need to be eligible to elect exclusion from Work Comp coverage in accordance with their state’s Workers’ Compensation act.
  • No employees, and no intention to hire employees during the policy period.
  • No payments to uninsured subcontractors.

What Your Clients Need to Know

  • Most ghost policies are issued through a state’s insurance fund or the NCCI Assigned Risk Pool.
  • This type of policy is solely intended to allow a business to obtain a certificate of insurance showing proof of Work Comp coverage.
  • Insurance companies do not issue ghost policies with the intent of paying out medical or indemnity benefits since the coverage is secured with the understanding that no individual(s) qualify for these benefits.
  • Ghost Work Comp policies are audited. If the audit determines there is additional exposure, the business owner will owe additional Work Comp premium.

How is the Premium Calculated?
The price of a Workers’ Compensation policy is based on a business’s payroll.  Payroll is multiplied by the applicable classification rate to determine the base premium of coverage.  Every Work Comp policy also has a minimum premium that is assigned based on the business operations.  The minimum premium is the least amount an insurer will accept to issue the coverage.  When there is no payroll under a Workers’ Compensation policy, the policyholder will pay no less than the policy minimum premium.  All ghost policies are subject to the minimum premium assigned by the insurance company.

To learn more, please contact Brenna Lemmon, Workers’ Compensation Underwriting Director at RIC, a division of Worldwide Facilities. Brenna can be reached at or (707) 535-2684.

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