What Is A Ghost Policy

Self-employed business owners which have a requirement to carry workers compensation coverage often obtain what is referred to as a ghost policy. The term “Ghost Policy” simply refers to a workers compensation policy where the owner is excluded from coverage and they have no other employee or uninsured subcontractor payroll.

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Why You Need A Ghost Policy

The most common reason a business owner purchases a ghost policy is to fulfill a regulatory licensing requirement or because a prospective client has requested a certificate of insurance showing proof of workers compensation coverage in order for them to work on their job.

You are probably thinking right now “If I have no employees why would I be need to carry workers comp coverage ?” While there are a number of reasons (Which you can read about here ), the primary idea behind the ghost policy is to ensure coverage is in place in the event that you hire employees or another uninsured subcontractor underneath you.

How Much Is It Going to Cost?

Ghost policies are the cheapest way for the self-employed to obtain workers comp coverage.

Premium on work comp policies is calculated by multiplying the employee payroll by the rate of the work being performed. Since there is no payroll to be classified in a ghost policy, the premium on the policy is usually a minimum base rate determined by the state in which your business operates.

In some states alternative programs are available which meet the workers comp requirements, provide some coverage for the business owner, and are cheaper than the state’s assigned risk pool based ghost policy. We cover those more in depth below.

Before we move on though, here is a list of the minimum premium rates in the state risk pools we service:

Georgia Ghost Policies
NCCI Assigned Risk Pool
$100,000 / $500,000 / $100,000 = $1,500
$500,000 / $500,000 / $500,000 = $1,575
$1,000,000 / $1,000,000 / $1,000,000 = $1,620

North Carolina Ghost Policies
NCCI Assigned Risk Pool
$100,000 / $500,000 / $100,000 = $1,500
$500,000 / $500,000 / $500,000 = $1,575
$1,000,000 / $1,000,000 / $1,000,000 = $1,620

South Carolina Ghost Policies
NCCI Assigned Risk Pool
$100,000 / $500,000 / $100,000 = $1,500
$500,000 / $500,000 / $500,000 = $1,575
$1,000,000 / $1,000,000 / $1,000,000 = $1,620

Tennessee Ghost Policies
NCCI Assigned Risk Pool
$100,000 / $500,000 / $100,000 = $1,250
$500,000 / $500,000 / $500,000 = $1,325
$1,000,000 / $1,000,000 / $1,000,000 = $1,370

Rules and Regulations Apply

It is important to understand that any employee wages or payments for labor to uninsured subcontractors will likely be rated for additional premium after the year end audit. Because ghost policies are placed through the assigned risk pool the rates on payroll are extremely high, and you could easily end up with a bill for thousands of dollars if you aren’t careful.

If you think you might hire an employee it would be best to check with your agent to find out if there is a better policy available. If you are going to hire subcontractors or other 1099 laborers you must obtain a certificate of insurance showing their workers comp coverage in order to not be audited for additional premium. (Not sure what an audit is? Find out how to pass with flying colors in our article on making work comp audits a breeze.)

Cheaper Options With Better Coverage

Unbeknownst to most sole proprietors there is a program available that fulfills their workers compensation requirement, that is written outside of the assigned risk pool, and is substantially cheaper that the pool option.

There are a handful of requirements, and if you check all of the boxes below you should touch base with us immediately to learn more about this policy.

Here are the guidelines of the program:

– Must be a Sole Proprietor or One-Person LLC. One-Person S-Corporations are acceptable as long as they are not in a contractor class code.
– Between the ages of 18 and 64
– Has no employees, sub contractors, or day laborers
– Has a valid Social Security Number
– Has an active email address

2020-04-16T17:45:14+00:00 Uncategorized, Workers Comp|0 Comments