Workers Comp Ghost Policy: What It Is, What It Costs, and the Traps

A workers comp ghost policy is a workers compensation policy written for a business that has no employees, with the owner excluded from coverage. The whole point of it is the certificate of insurance it produces, usually because a general contractor will not let a subcontractor on the jobsite without one. There are no employees to cover, the owner has opted out, so the policy insures nobody.

That sounds like something a regulator should shut down. In most states it is actually legal, and for a genuinely solo operator it is often the cheapest way to keep working for contractors who demand proof of coverage. Think of the arrangement as a chain. A contractor demands a certificate, a carrier issues a zero-payroll policy with the owner excluded, and the certificate satisfies the contractor's premium audit. Every trap in this guide comes down to one of two events breaking that chain. You get hurt, or you hire someone.

Ghost Policy

A ghost policy is a workers compensation policy issued with zero estimated payroll. The business owner is excluded from coverage and there are no employees to cover, so it generates a valid certificate of insurance while insuring no one.

Menlo

What is a workers comp ghost policy?

A ghost policy is a real workers compensation policy from a licensed carrier. Your business is the named insured, the application shows zero estimated payroll, and either you sign an exclusion form removing yourself from coverage or you lean on your state's default rule that sole proprietors are not covered unless they opt in. The carrier then issues a certificate of insurance that looks identical to one backed by a full policy. That resemblance is the point.

Why do general contractors demand certificates? Because of how their own premium audit works. When a subcontractor cannot produce proof of coverage, the auditor treats that sub's labor cost as the contractor's payroll and charges premium on it at the contractor's rates. Your certificate takes your invoices out of that math. Most owners assume the policy behind the certificate would pay something if a worker got hurt on their job. It would not. With zero payroll reported and the owner excluded, there is no covered person on the policy, so a claim has nothing to attach to.

How much does a ghost policy cost?

A ghost policy costs the carrier's minimum premium, meaning the smallest amount it will accept to issue any policy, plus a flat expense constant. In Menlo's placement experience most run between $750 and $2,000 a year depending on the state, the carrier, and your class code. Compare that to a standard policy, which is priced per $100 of actual payroll, so covering even one $50,000 employee in a construction class can cost several times more. A standard policy also starts the claims record that eventually feeds your experience mod, the multiplier that will discount or surcharge your premium once you grow.

One detail from practice catches people off guard. A ghost policy still gets audited. At expiration the carrier will want your Schedule C, bank records, or 1099s to confirm the payroll really was zero. Here is the side by side:

What are the risks of a ghost policy?

The first risk is your own body. You are excluded, so a fall from a ladder brings no medical coverage, no wage replacement, and no death benefit from this policy. And some health plans exclude injuries arising out of self-employment work, which means an owner can be uninsured twice over at the exact moment of a jobsite injury. Carry a ghost policy and you generally need separate health and disability coverage to stand where workers comp would have stood.

The trap runs the other way up the chain too. A ghost-policy sub brings two helpers, one gets hurt, and the claim tends to land on the hiring contractor as the statutory employer. That contractor's audit can still backcharge for the uninsured labor, which is why some general contractors refuse ghost certificates outright. Ask what the contractor accepts before you bid.

When is a ghost policy the right tool?

A ghost policy fits when three things are all true. You genuinely work alone, with no helpers of any kind, not even casual day labor. The contractors hiring you accept it. Your state and carrier allow a zero-payroll policy. For that narrow situation it does its one job cheaply, and it binds fast because there is no payroll to underwrite.

When a job grows big enough to need a helper, the right move is to convert before the hire, never after. Carriers will endorse payroll onto the policy mid-term, and the added premium is small money next to an uncovered injury claim or a fraud referral.

How do states treat ghost policies?

States range from regulated acceptance to effective prohibition. Minnesota is the clearest example of the first camp. Its Department of Labor and Industry recognizes what it calls zero estimated exposure policies, but as of January 1, 2026 the holder must attest to having no employees or payroll, must disclose the policy in writing to anyone they directly contract with, and must hand over a copy, which the recipient must keep for three years.^[1] The state's public lookup tool now flags which employers carry zero-payroll policies, so a Minnesota contractor can no longer mistake a ghost certificate for real coverage.

Other states lean the opposite way. Some rating systems assign a minimum payroll to any owner who stays on the policy, which quietly turns the ghost into a small standard policy, and some carriers simply decline zero-exposure business. Before counting on one, confirm with your state's insurance department or a broker licensed there that a zero-payroll policy is available, and that it satisfies whoever is asking for the certificate.

When does California require workers comp with no employees?

California already requires five license classifications to carry workers compensation or approved self-insurance whether or not they have employees: C-8 Concrete, C-20 Warm-Air Heating, Ventilating and Air-Conditioning, C-22 Asbestos Abatement, C-39 Roofing, and C-61/D-49 Tree Service.^[2] Roofers have been under that rule for years. SB 216 added the other four, applying the rule to them on July 1, 2023.^[3] For a solo concrete or HVAC contractor, the policy that satisfies the Contractors State License Board is often exactly the minimum-premium, owner-excluded policy this guide describes, though CSLB, not any guide, decides what keeps your license in good standing.

Every other classification can still file an exemption certificate while it truly has no employees. That exemption was scheduled to end on January 1, 2026, the date SB 216 would have extended the requirement to every licensed contractor. Then SB 1455, which became law in September 2024, moved the date to January 1, 2028 and directed CSLB to build procedures for verifying exemption claims by January 1, 2027.^[4] So the confusion circulating on contractor forums has a short answer. Hold one of the five listed classifications and you need coverage now. Hold any other classification with no employees and your deadline is January 1, 2028, with CSLB as the authority on your specific license.

This guide is for educational purposes and summarizes standard NCCI policy language and state statutes. Your policy's specific terms, conditions, and endorsements control. Talk to a licensed broker about your actual exposures.

The Bottom Line

A ghost policy is a zero-payroll workers compensation policy that produces a certificate while covering no one. For a true solo operator, that is often the cheapest way to stay on a contractor's approved list, and it fails the moment you hire or get hurt. California's five affected classifications already need coverage today. Every other contractor's deadline is January 1, 2028. Talk to your broker before your first hire, not after.