A ghost policy is workers’ comp on a business with nobody left to rate

A ghost policy is a real workers’ compensation policy written for a business that has no employees and no payroll. The owner, whether a sole proprietor, a partner, the member of a single-member LLC or the officer of a very small corporation, is excluded under the state’s own election rules. With the owner out, there is no remuneration for the carrier to charge against, so the policy sits at or near the carrier’s minimum premium for the class.

What the client actually gets out of it is the certificate of insurance. That is the whole reason the account exists, and it is why the term matters to an agency: a ghost policy is a small, specific product with a specific job, not a name for a lapsed or cancelled policy.

Why a one-person business needs one

The request almost never starts with the owner. It starts with someone who will not let a one-person crew on the job without proof of workers’ compensation on file:

  • a general contractor’s subcontract;
  • a licensing board;
  • a franchisor;
  • a property manager.

The buyers follow from that: owner-operators in trucking, courier and delivery work; sole proprietors and single-member LLCs in the trades; officers of a very small corporation who have elected out of coverage; subcontractors who need the certificate before they can start on a general contractor’s site; and franchisees running a location on their own. Small account, short deadline, and usually attached to a client the agency would rather not send somewhere else.

What it does not do: it does not cover the owner

An excluded owner is excluded. If that owner is hurt on the job, the ghost policy is not what answers: it does not pay the owner’s medical treatment or lost wages. It satisfies a contract or a licensing requirement, and that is all it does. The agencies that say so in writing when the account opens are the ones not having a bad conversation at claim time.

An owner who wants to be protected can, where the state allows it, elect to be covered instead. The owner's payroll, set under the state's rules, is then added and the policy is rated from there. That is still a placement worth writing, but it is no longer a ghost policy.

It is also comp, and only comp. Harm the owner does to someone else’s person or property sits on general liability; the truck they drive to the job sits on commercial auto; the tools in the back of it sit on inland marine.

Four ways an account stops being a ghost policy

  • The owner wants to be covered. Electing in adds the owner's payroll and the policy is rated, not a ghost policy.
  • There are subcontractors or 1099 labor on the job. The program takes no subcontractors or 1099 labor of any kind.
  • The class is outside the program’s list. Heavy construction, work at height and healthcare sit outside it and go in as standard workers’ comp submissions.
  • The business hires its first W-2 employee. Real payroll means a rated workers’ compensation policy. That is a larger account than the one you opened, and it stays yours.

Where Cennairus places it

Cennairus places owner-only workers’ comp on Cimarron paper in fourteen states: Alabama, Arkansas, Illinois, Indiana, Iowa, Kansas, Mississippi, Missouri, Montana, Nebraska, New Mexico, South Carolina, South Dakota and Virginia. In any other state, a one-person account goes in as a standard workers’ compensation submission to the markets that write it.

Nothing on this line comes back automatically. A producer works the placement with the market and the certificate is issued once the risk is accepted. The agency stays the agent of record and is paid its commission under the broker agreement.

What to send

The submission is short on purpose. Send:

  • the legal entity and its state;
  • the owner’s name and title;
  • what the work actually is, in plain words, so the class can be set;
  • whether the owner is excluding or electing in;
  • the date the certificate is needed.

Prior coverage helps if it exists; on most of these accounts it does not. Before the client signs a subcontract, read its insurance section: some contracts ask for specific limits or additional-insured wording, and that is worth confirming early. The solopreneur and ghost policy page takes the entity, the state and what the owner does, which is enough to tell whether the account is a ghost policy or a rated submission.