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What is a Ghost Policy?
The most common reason for buying a ghost policy is to satisfy some requirement to
provide a certificate of insurance to a general contractor or other company.
Generally, a small contractor will win a bid to perform work, but will be required
to provide proof of coverage prior to starting the job. The whole concept of a ghost
policy is to ensure a sub-contractor has some sort of coverage in place in case they
hire employees or another uninsured subcontractor to assist with a job.
Ghost polices are strictly a form of self-employed workers compensation insurance.
There are a large number of small contractors and/or sub-contractors who do not have
any employees and who do not want to pay higher premiums for coverage on themselves.
A ghost policy is the cheapest way for self-employed business owners to get a
workers comp policy.
The term ghost policy refers to the fact that the workers comp policy basically
provides no "real coverage". It is a minimum earned policy whereas the owner is
excluded from coverage on the Acord 130 Form and there are no active or anticipated
employees for the policy period.
A minimum earned policy is a policy that includes the standard state expense
constant and the insurance companies minimum required premium for a policy. This
type of policy is usually significantly cheaper than a policy where the state
required minimum owner wages are applied to a policy.
Here's a quick example: Let's say you're a small carpenter in GA using class code
5645 with a rate of 75.87 per hundred. The current minimum payroll for a
sole-proprietor in Georgia is $47,000. The minimum for owners of a corporation or
LLC is $46,800.
There are a few private insurance companies that quote ghost policy insurance in
select states. However, most ghost policy coverage is written through the state
In some instances, self-employed business owners may be better off including
themselves for coverage instead of purchasing a ghost policy. One primary
that you will actually have coverage in the event of an injury. Additionally, there
are more insurance company options available and you could qualify for a better
payment plan. Finally, depending on your class code and workers compensation rates,
the overall cost of coverage might not be much more than a ghost policy.
Below is our 2016 Table indicating the cost and availability of ghost insurance by
* If you are located in a state where ghost polices are not available contact
one of our specialist to see if your business qualifies for one of our standard
programs for self-employed workers compensation insurance.
Like any other workers compensation policy, a ghost policy is for a period of one
year. Ghost insurance should only be purchased by self-employed business owners with
the following characteristics: (a) no employees or plans to hire during policy
period, (b) no payments to uninsured subcontractors, and (c) no payroll of any kind
aside from the owner(s). Ghost policies are subject to audit and if any additional
exposure is determined the policyholder will be on the hook for additional premium,
or audit balance.
Contact one of our Workers' Compensation Specialists today at 888.611.7467 to learn
more about our ghost policy programs and other insurance products and services.
There are several benefits to buying a ghost workers comp policy. Self-employed
business who purchase ghost polices might save a fair amount of money over a
standard work comp policy.
Fortunately, a ghost policy satisfies most contract requirement for various
contractors and allows an insurance agency to issue certificates of insurance on
behalf of the insured. The second benefit is that the policyholder should have
automatic coverage under the policy for any employees or uninsured subcontractors
hired during the policy period.
It is important for business owners to understand that any additional employee wages
or payments to uninsured subcontractors will likely result in additional premium due
after a workers compensation audit is
performed. Policyholders should contact their
agent or insurance company to endorse their policy in the event an employee is hired
during the policy period.
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