Workers’ Comp Ghost Policies: What Contractors Need to Know in 2026

If you’re a sole proprietor or independent contractor with no employees, you’ve probably run into this frustrating catch-22: you don’t need workers’ compensation insurance, but you can’t land a job without it. Whether you’re a plumber, electrician, carpenter, or any other trade, the problem is the same.

That’s where a ghost policy comes in. And with California’s new law now requiring all licensed contractors to carry workers’ comp coverage regardless of employee count, understanding your options has never been more important.

What is a workers’ comp ghost policy?

A ghost policy is a workers’ compensation insurance policy designed for business owners with no employees and no payroll. Like traditional workers’ comp, it’s technically based on payroll. But since there’s no payroll to cover, the premium is significantly lower, typically between $500 and $2,000 per year.

Here’s the key thing to understand: a ghost policy provides no actual coverage or benefits. If you get hurt on the job, it won’t pay a dime toward your medical bills or lost wages. What it does provide is a Certificate of Insurance (COI) showing you carry workers’ comp, which is often the one piece of paper standing between you and your next contract.

It’s called a “ghost” policy because it insures no actual workers. The coverage exists on paper only.

Ghost policy vs. full workers’ compensation at a glance

	Ghost Policy	Owner-Only Policy	Full Workers’ Comp
Covers workplace injuries	No	Yes (owner only)	Yes (all covered employees)
Provides a Certificate of Insurance	Yes	Yes	Yes
Typical annual cost	$500 to $2,000	$1,000 to $5,000+, based on owner payroll or state minimum	Based on payroll, classification, and claims history
Purpose	Compliance and proof of coverage	Owner protection and compliance	Employee protection and compliance

Why would anyone pay for a policy with no coverage?

It’s a fair question. But once you understand how the contracting world works, it makes sense.

General contractors need your COI. When a GC’s workers’ comp carrier audits their policy, they’ll request certificates from every subcontractor the GC hired. If the GC can’t produce your COI, the amount they paid you gets treated as payroll on their policy, and their premium goes up. That’s why GCs won’t let you on the job site without proof of workers’ comp. (For more on how this works from the GC side, see our general contractor insurance guide.)

You need it to bid on work. Many clients, general contractors, corporate accounts, and even homeowners expect to see workers’ comp coverage before they’ll award a contract. Without it, you’re locked out of opportunities, regardless of how good your work is.

Some states require it, even if you’re exempt. This is the big one for California contractors, which we’ll get into below.

California’s new workers’ comp requirement for contractors

In 2023, California passed legislation requiring all licensed contractors to maintain workers’ compensation coverage by January 1, 2026, even those with zero employees. Before this law, contractors without employees could simply file an exemption with the Contractors State License Board (CSLB). That option is going away.

This means every licensed contractor in California now needs a workers’ comp policy on file to maintain an active license. For sole proprietors with no payroll, a ghost policy is one of the most common ways to satisfy this requirement.

Watch out for California-specific pitfalls

California contractors buying ghost policies should be aware of a few things that trip people up:

Minimum premiums still apply. If you’re on a payment plan and cancel early, you’ll still owe the full minimum premium. These minimums have been climbing as carriers write more ghost policies.

Audits can still bite you. Even with zero payroll, your carrier will audit the policy. If you paid any uninsured subcontractors, used day laborers, or had 1099 workers who weren’t properly licensed and insured, the auditor can reclassify those payments as payroll. That means a surprise bill for additional premium.

CSLB compliance requires attention. You need to make sure your policy documentation is filed correctly with the CSLB, including the proper class codes. Under Assembly Bill 336 (signed in 2024), contractors must list their top three workers’ comp class codes on their license. Filing errors can delay renewals, trigger fines, or even suspend your license.

Who should consider a ghost policy?

A ghost policy makes sense if you check these boxes:

You’re a sole proprietor, independent contractor, or single-member LLC with no employees (full-time or part-time). A general contractor or client requires proof of workers’ comp before you can start work. Your state requires workers’ comp coverage even though you’re technically exempt. You want to bid on larger projects that require a COI. (If you also need general liability insurance, most GCs will require both.)

What is an owner-only workers’ comp policy?

This is where a lot of contractors get confused, and rightfully so. The terms “ghost policy” and “owner-only policy” get thrown around interchangeably in the field, but they’re technically two different things.

An owner-only policy is a workers’ compensation policy that covers just the business owner (or owners) with no other employees. It’s a legitimate policy that provides actual coverage. If you fall off a ladder, throw out your back, or get hurt with a power tool, an owner-only policy pays your medical bills and a portion of your lost wages, just like it would for any covered employee. You’re simply electing to include yourself as the covered worker.

A ghost policy is a workers’ comp policy where the owner has elected to be excluded from coverage. That exclusion results in a policy with essentially zero payroll and a minimal premium. It exists on paper to satisfy a contractual or regulatory requirement, but it doesn’t actually cover anyone. It’s a certificate generator.

That’s the key technical difference: an owner-only policy covers the owner, while a ghost policy excludes the owner, meaning nobody is covered.

The confusion happens because people use “ghost policy” loosely to describe any minimal workers’ comp policy for a sole proprietor or small contractor with no employees. But in insurance terms, a ghost policy specifically means the owner has opted out of coverage. If the owner is included, it’s an owner-only policy, and the premium reflects that added risk.

Worth noting that not every state allows owner exclusions, and some carriers won’t write ghost policies at all. Your options depend on where you operate and which carriers your broker works with.

The cost difference reflects the coverage difference. An owner-only policy costs more because the carrier is actually taking on risk. Premiums are tied to the owner’s payroll or, in many states, a minimum owner payroll amount set by the state’s rating bureau. Even if you pay yourself less than the state minimum, the carrier will use that minimum to calculate your premium.

Your premium is calculated as: (payroll / 100) x class code rate. A higher minimum payroll means a higher premium, regardless of what you actually take home. In California, for example, the 2025 officer minimum payroll is $62,400. At a class code rate of $5.00 per $100 of payroll, that puts your base owner-only premium at roughly $3,120 per year before any experience modification or carrier surcharges. In Massachusetts, where the minimum is only $15,080, that same rate would produce a base premium of about $754.

See the full state-by-state minimum owner payroll table at the end of this article for your state’s figures.

Why an owner-only policy might be worth it

If you’re a sole proprietor doing physical work, an owner-only policy can be a better deal than it looks at first glance. Workers’ comp coverage has some significant advantages over personal health insurance when it comes to work injuries:

No deductibles, copays, or coinsurance on medical treatment. Coverage is no-fault, meaning you don’t have to prove someone else caused the injury. It covers lost wages (temporary disability benefits) if you can’t work while recovering. It includes vocational rehabilitation if you need it.

For a contractor in their 40s, 50s, or 60s doing physical labor, one serious injury could easily cost more than years of owner-only premiums. If you’re doing carpentry, electrical work, roofing, or any trade where injury risk is real, paying the higher premium for actual coverage is worth considering.

Ghost policy vs. owner-only policy vs. “if any” policy

	Ghost Policy	Owner-Only Policy	“If Any” Policy
Covers the owner’s injuries	No	Yes	Depends on state and whether owner elects coverage
Covers employees	No (no employees allowed)	No (owner only)	Yes, if/when employees are added
Provides a Certificate of Insurance	Yes	Yes	Yes
Typical annual cost	$500 to $2,000	$1,000 to $5,000+, tied to owner payroll or state minimum	Similar to ghost when dormant; adjusts when payroll is reported
Best for	Proof of coverage only	Solo contractors who want injury protection	Businesses that may hire employees in the future

What is an “if any” policy?

An “if any” workers’ comp policy is designed for businesses that currently have no employees but might hire someone down the road. The policy essentially sits dormant until you report payroll. Once you bring on a worker, the coverage activates and you start paying premium based on actual payroll.

This can be a good option if you’re a growing business that plans to hire but hasn’t yet. It gives you the COI you need now and automatically transitions to full coverage when your situation changes, without requiring you to buy a new policy.

How to decide which policy you need

If you just need a certificate to satisfy a GC or meet a state requirement and you have no interest in covering yourself, a ghost policy is the cheapest route.

If you’re doing physical work and want actual protection in case you get hurt on the job, an owner-only policy is the smarter investment. Think of it less as a cost and more as income protection. One bad injury without coverage could sideline your business for months. (For a broader look at what coverage artisan and trade contractors need, check out our full guide.)

If you expect to hire employees in the near future, an “if any” policy gives you flexibility without having to switch policies later.

And here’s something California contractors should pay close attention to: the new 2026 law requires workers’ comp coverage, but it doesn’t specify that it has to be a ghost policy. An owner-only policy satisfies the CSLB requirement and gives you real protection. If you can afford the higher premium, it’s the better option for most contractors who are still actively working their trade.

Paper general contractors and subcontractor exposure

If you’re a general contractor who manages projects using subcontractors but carry no employees on your own payroll, you’re what the industry calls a “paper GC.” You still need workers’ comp coverage, and a ghost policy alone may not be enough.

Some programs offer workers’ comp policies for paper GCs with subcontractor exposure of 50% or more, up to 100%. These policies account for the risk associated with managing sub crews, even if you’re not cutting paychecks yourself.

If you’re subbing out most or all of your work, talk to your broker about a program that covers your specific situation. And make sure you’re collecting COIs from every sub before they start work. If you can’t produce those certificates at audit time, the amounts you paid your subs will be treated as your payroll.

Are ghost policies legal in every state?

No. Ghost policy rules vary by state and change frequently. As of now, ghost policies are permitted in roughly half of U.S. states, including Alabama, Arizona, Connecticut, Florida, Illinois, Nevada, Ohio, South Carolina, Virginia, and Washington. But this list shifts as regulators update their rules.

Before purchasing a ghost policy, confirm with your insurance agent and your state’s workers’ comp board that it’s a valid option where you operate.

How much does a ghost policy cost?

Most ghost policies run between $500 and $2,000 per year, depending on your state, your trade classification, and the carrier. That’s a fraction of what you’d pay for a full workers’ comp policy with actual benefits.

One important detail: ghost policies are typically paid in full upfront. Unlike standard workers’ comp policies where you might set up monthly or quarterly payments, most carriers require the entire annual premium at the time of purchase. Since the premium amount is relatively small and there’s no payroll to adjust throughout the year, carriers don’t offer payment plans on these policies. Budget accordingly, especially if you’re buying one for the first time.

And keep this in mind: if your policy gets audited and the carrier finds unreported payroll or uninsured subcontractor payments, you’ll owe additional premium retroactively. Factor the cost of a ghost policy into your bids so you’re not eating it out of pocket.

How to get a ghost policy

Getting a ghost policy is straightforward. You’ll need to provide basic information about your business: your trade, your state, your business structure, and confirmation that you have no employees. Most brokers can have you covered within 24 hours, and you’ll receive a COI you can use immediately for bids and contracts.

Work with a broker who understands contractor insurance. Not every agent knows the nuances of ghost policies, audit exposure, or state-specific filing requirements (especially in California). An experienced contractor insurance broker can help you avoid the common mistakes that lead to surprise audit bills and licensing headaches.

The bottom line

A ghost policy is a practical, affordable tool for sole proprietors and independent contractors who need proof of workers’ comp to stay competitive and compliant. It won’t cover your injuries, but it removes a major barrier to landing work and meeting contractual requirements.

If you’re a California contractor, the clock is ticking. Make sure you have a workers’ comp policy in place before the 2026 deadline to keep your license active.

And regardless of what state you’re in, don’t just grab the cheapest ghost policy you can find without understanding the audit process, the filing requirements, and the potential costs of getting it wrong. A few minutes with a knowledgeable broker can save you thousands down the road.

Reference: Minimum owner payroll by state (2025)

When a carrier writes an owner-only workers’ comp policy, each state sets a minimum annual payroll figure for officers, owners, and partners. Even if you pay yourself less than this amount, the carrier uses the state minimum to calculate your premium. Your premium formula is: (payroll / 100) x class code rate.

State	Officer/Owner Minimum Payroll
Alabama	$59,800
Alaska	$31,200
Arizona	$67,600 (individual/partner min $7,200)
Arkansas	$54,600
California	$62,400
Colorado	$76,500 (flat)
Connecticut	$85,800
Delaware	$69,056
District of Columbia	$91,000
Florida	$65,000 (construction min $33,800)
Georgia	$67,600
Hawaii	$59,800
Idaho	$54,600
Illinois	$72,800
Indiana	$52,000
Iowa	$28,600
Kansas	$57,200
Kentucky	$54,600
Louisiana	$59,800
Maine	$28,600
Maryland	$75,400
Massachusetts	$15,080
Michigan	$32,760
Minnesota	$71,344
Mississippi	$46,800
Missouri	$54,700 (flat)
Montana	$10,400
Nebraska	$57,200
Nevada	$6,000
New Hampshire	$36,400
New Jersey	$43,160
New Mexico	$57,200
New York	$48,100
North Carolina	$62,400
Oklahoma	$54,600
Oregon	$70,200
Pennsylvania	$66,196
Rhode Island	$65,000
South Carolina	$28,600
South Dakota	$54,600
Tennessee	$65,000 (construction min $31,200)
Texas	$7,800
Utah	$67,600
Vermont	$28,600
Virginia	$36,400
West Virginia	$54,600
Wisconsin	$20,228

Source: ICW Group 2025 Officers & Partners Annual Payroll Limitations. Figures shown are officer minimums. Partner and sole proprietor minimums may differ in some states. Some states use a flat payroll amount rather than a minimum/maximum range. Minimums are updated periodically, so confirm current figures with your broker.

This article is for informational purposes only and does not constitute legal or insurance advice. Workers’ compensation requirements vary by state. Consult with a licensed insurance professional and your legal advisor to determine the right coverage for your specific situation.