Independent contractors have something of a gray area when it comes to workers’ comp insurance. You don’t have employees, yet clients may require you to carry a policy before starting work. Getting a full workers’ comp policy can be pretty expensive and unnecessary in your situation.
Ghost policies offer a solution – providing the coverage you need at a lower cost. In this quick guide, we’ll explain what ghost policies are, who they benefit, and things to consider before getting one.
A ghost policy is a special type of workers’ comp coverage designed for independent contractors and sole proprietors who don’t have employees but need proof of insurance. It provides the certificate of coverage clients want without making you pay for a full policy.
Ghost policies don’t actually provide any real insurance. They won’t cover you if you get injured on the job. Instead, they simply give you a certificate showing you have met state workers’ comp requirements or client demands.
There are two main reasons an independent contractor might need a ghost policy:
1. State law requires proof of workers’ comp, even for solos. Some states demand all businesses show they provide coverage for any potential employees.
2. Clients want assurance you’re covered. General contractors often make subs show evidence of workers’ comp to protect themselves. If you hired help and someone got hurt, they could otherwise be liable.
Without employees, the policy won’t pay out claims. But it satisfies legal and client requirements for proof of coverage.
Ghost policies don’t provide any real coverage. Think of them like “placeholder” policies. They simply give you a certificate of insurance to show clients and state regulators.
If you do end up hiring employees during the policy period, you won’t necessarily have coverage for them. Any staffers would need their own proper insurance. Ghost policies are solely meant as evidence you can supply workers’ comp if needed later.
Unfortunately, no. Some states don’t allow ghost policies at all or have strict rules around them. You’ll need to check with your state workers’ comp bureau to be sure they are accepted where you live and work.
Some states also require even solo entrepreneurs to carry real workers’ comp policies, not ghost coverage. Be sure to investigate your own state’s laws before assuming you can get a ghost policy.
Wondering where to get a ghost policy? In most states allowing them, you can work with any insurance agent or broker licensed to sell workers’ comp in your area. Be clear you want ghost coverage, not a real policy, and they can help you secure it.
You can also work with insurtechs like Cerity, who offer easy online quotes for ghost policies and other light workers’ comp products. Just answer a few questions and you can often get same-day coverage.
As an independent contractor, having a ghost policy can be crucial for landing clients and complying with state laws. Just remember it doesn’t actually cover you – it simply provides proof of coverage in case you expand later. Check if your state permits ghost policies and connect with a licensed workers’ comp agent or insurer to secure the coverage you need.
Kenneth is a proud native of sydney, born and raised there. However, he pursued his education abroad and studied in Australia. Kenneth has worked as a journalist for almost a decade, making valuable contributions to prominent publications such as Yahoo News and The Verge. Currently, he serves as a journalist for The Hear Up, where he focuses on covering climate and science news. You can reach Kenneth at [email protected].