For your best business protection and savings, we recommend bundling GL with some other important coverages on one Business Owners Policy!
2.3 million men and women experience accidents while on the job. Workers comp insurance is a critical part of the US workforce. It functions to protect employees and employers against the costs of numerous injuries and illnesses.
Medically consulted injuries totaled 4.2 million in 2021. In the same time period, the US Bureau of Labor Statistics recorded over 5,000 of those incidents having deadly consequences. They reported a 9% increase from the previous year.
For these reasons, it is easy to see why workers' comp policies are required for businesses. However, some can have exceptions to this policy if they don’t have eligible employees.
However, this exception can cause a problem for legal and client requirements, leading to some of these businesses purchasing a ghost policy for workers comp.In this article, we will cover the basics including:
Definition of workers comp ghost policy
A brief history of workers comp ghost policy
Why would you need a workers comp ghost policy?
Is workers comp ghost policy illegal?
Cost of workers comp ghost policy
Where to purchase workers comp ghost policy
A workmans comp ghost policy is an insurance policy geared toward self-employed business owners that lets them satisfy client requirements and state laws about workers comp. However, since the owner doesn’t have any employees needing coverage, the policy doesn’t actually cover anyone.
A workers comp insurance ghost policy provides a certificate of insurance (COI) for the owner, which is often required of him to conduct business. These policies are often cheaper than a regular workers comp policy, so ghost workers compensation might actually be the right decision for owners.
A workers compensation insurance ghost policy is great for saving money, but employers should be wary that there are serious legal consequences. Be sure to pick an insurance company that will help you decide if you need a workers comp ghost policy for your personal situation.
Workers' compensation first came after states began passing workers compensation acts in response to revelations about riskier working conditions in an increasingly industrialized workforce in the 1900s.
Before this, workers would have to sue their own company to get any compensation and would often lose because the burden of proof was too high and legal costs were to much.
Eventually, states would make a workers' compensation insurance policy compulsory to for the majority of businesses. Customers and clients would also adopt their own standards requiring proof of this kind of insurance.
However, not every business has employees so having to pay for a workers comp policy when it doesn’t grant a benefit was seen as an undue burden by many. In response, insurance companies began offering ghost workers comp insurance which allowed companies to have proof of this kind of insurance while paying less for premiums. This was when the current ghost policy workers comp definition came to be, which is an employee insurance policy that covers no employees.
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The main reasons to buy a workers comp ghost policy include the following:
To secure a contract with a client who requires proof of workers comp insurance
To fulfill state requirements for your company to operate there
If you are bidding on a job in some industries like construction, you need to show you have the potential to hire employees and provide them coverage. A workers comp ghost policy is an inexpensive way to show this
Yes, in some states, workers’ comp ghost policies are banned by law. The reason these policies are banned is that some employers take advantage of them and refuse to use them the right way, leading to unreported workers not getting coverage. Below is a list of which states these policies are offered vs where they are unavailable:
| Legal | Illegal or Unavailable |
|---|---|
| Alabama | California |
| Alaska | Colorado |
| Arkansas | Delaware |
| Connecticut | Hawaii |
| Florida | Idaho |
| Georgia | Kentucky |
| Illinois | Idaho |
| Indiana | Louisiana |
| Iowa | Maine |
| Kansas | Maryland |
| Mississippi | Massachusetts |
| Missouri | Michigan |
| Montana | Minnesota |
| Nebraska | Oklahoma |
| Nevada | Oregon |
| New Hampshire | Pennsylvania |
| New Mexico | Rhode Island |
| Ohio | Tennessee |
| South Carolina | Texas |
| South Dakota | Utah |
| Vermont | Wisconsin |
| Virginia | |
| Washington | |
| West Virginia | |
| Wyoming |
Some states will have punishments for utilizing a workers comp ghost policy. You will have to pay the penalty for not having the proper worker’s compensation requirements. These penalties can be quite severe, resulting in over $10,000 in fines and jail time of up to a year. Your business may also be ordered to be shuttered.
Workers compensation ghost policy in Georgia is available between $1500-$1800. Georgia’s State Board of Workers’ Compensation requires that your coverage starts from the first day of work. The law requires any business with three or more workers must have a form of workers’ compensation insurance. You can verify your coverage on their website
Ghost policies in South Carolina typically cost between $1250-$1550. The South Carolina Workers Compensation Commission determines that anybody with four or more employees requires coverage.
In South Carolina, non-profit organizations are required to have workers’ compensation policies as well, though it does make exemptions for agricultural employees and federal employees.
While a workers comp ghost policy can be a good option, it might not always be the best thing for your company. A few reasons it would be better to purchase real workers comp insurance include:
If you plan to hire full-time workers in the future, you will want to invest in a real workers comp policy earlier so you can start working on safety incentives and getting your premium down early
Some states ban ghost workers comp policies so that you would have no choice but to purchase a real one
If you have forgotten to disclose to your insurance company when you hire an employee, you could get hit with a retroactive premium penalty that could be unexpected and costly
Yes, despite a ghost workmans comp policy offering no coverage, it does cost a premium every month. Rates differ from one company to the next. You can get the cheapest workers comp ghost policy quote by comparing offers. Start by clicking the “Get Quotes” button on this page.
