A workers comp ghost policy is a policy that reports no employee payroll. It exists so a business with no staff can produce a certificate of insurance when a customer or a general contractor asks for one, and it costs little while it holds, because there is no payroll for the rate to apply to. That arrangement holds exactly as long as the payroll stays at zero. The moment someone is paid to work, the policy is a normal policy with a payroll figure that was wrong from the start, and the audit at the end of the term is where that gets settled.
Nothing about the arrangement is hidden or unlawful. The name is market slang, not a product category. What makes it fragile is that the two things it is asked to do, satisfy a customer's paperwork request and cost almost nothing, both depend on an assumption nobody checks until the term is over.
What is a workers comp ghost policy actually priced on?
Premium on any workers' compensation policy is reported payroll multiplied by a rate for a classification, so a policy reporting no payroll has almost nothing to charge against. There is no separate ghost-policy rating rule. That is why the policy behaves like any other one at the end of the term: the carrier compares what was estimated against what was paid.
So the useful question is not what the policy covers. It is what the premium audit will find in the records. A sole proprietor who genuinely worked alone for twelve months has an audit that confirms zero and closes. A sole proprietor who paid a nephew for three weeks in July has an audit that finds three weeks of wages, and the premium is recalculated on them.
What happens at the audit if you hired someone
The payroll comes back in, and so does anything paid to an uninsured subcontractor. Georgia's Office of Commissioner of Insurance states the rule plainly for the subcontractor case: if you cannot show evidence a subcontractor had coverage, "your insurance company will charge for the subcontractor according to the services that subcontractor provided."
That is the mechanism that surprises people, because it does not require anyone to have been injured, or anyone to have lied. It requires only that money left the business to pay for labor and that no certificate exists to show the labor was insured elsewhere. An uninsured subcontractor is treated as exposure on your policy, and a policy priced at the minimum has no cushion absorbing it.
Two practical consequences follow. First, the additional premium is calculated on the class code that fits the work, not on whatever the policy was originally written as. Second, the bill arrives after the term, which means after the money has been spent and often after the job has been paid out. Running the numbers on the labor you expect to buy, with the subcontractor exposure tool, is cheaper than finding out from the audit.
Does the certificate protect the contractor who collected it?
Not on its own. A certificate reports what the insurer said about a named business on the day the certificate was issued, and a ghost policy's certificate says exactly that and nothing more. Georgia's Office of Commissioner of Insurance tells contractors to take the extra step of verifying the certificate through the state's online portal, and to confirm that coverage "continues to be coverage" for the whole period the subcontractor is working.
The reason the regulator pushes that hard is the liability underneath it. Under OCGA 34-9-8(a), a "principal, intermediate, or subcontractor shall be liable for compensation to any employee injured while in the employ of any of his subcontractors engaged upon the subject matter of the contract," and to the same extent as the immediate employer. A general contractor who collects a certificate from a one-person outfit, and then watches that outfit show up with two people, is holding paper that describes a business that no longer exists in the form the paper describes. That is the same failure that decides ordinary audits, which is why subcontractor coverage has to be verified rather than collected.
Can a worker be too temporary to count?
No, at least not in Virginia. The Virginia Court of Appeals decided on February 24, 2026 that how long an outside worker spends on a job does not matter: anyone hired in the usual course of an employer's business counts as an employee under the Workers' Compensation Act, however briefly they worked.
The facts are worth sitting with, because they describe an ordinary small contractor rather than a bad actor. Gencon, a small remodeling contractor, had two direct employees. On a $75,000 basement remodel, eight or nine tradespeople contributed, and most of the outside workers finished their portion in four days or less. The Commission found that three of Gencon's five jobs in the year before the accident each required at least two subcontractors' employees. On March 29, 2022 a concrete wall collapsed on Jose A. Zacarias Perez, who earned $600 a week, and injured him seriously.
Virginia exempts employers with fewer than three employees regularly in service. Gencon's argument was that short stints should not count toward that threshold. The Deputy Commissioner agreed; the full Commission reversed; the Court of Appeals sided with the Commission and affirmed the award of temporary total disability and medical benefits. Gencon had no workers' compensation insurance, so the state's Uninsured Employers' Fund defended the claim and was left carrying the cost.
Read that against a ghost policy and the overlap is obvious. A policy reporting zero payroll is a policy whose owner has told the carrier there is nobody in the usual course of the business. Four days of somebody else's help is enough, in Virginia, to make that statement untrue.
The license question that runs on a separate clock
In California, coverage has to be continuous, and a gap does more than create an audit problem. The Contractors State License Board states that "Workers' compensation coverage must be continuous," that a lapse results in license suspension, and that work performed during a suspension is considered unlicensed and can lead to disciplinary action. The suspension lifts once acceptable proof of coverage is received and processed at CSLB headquarters.
The exemption route has its own deadline. A California licensee with no employees can file a signed exemption, but CSLB states that the exemption is no longer valid once you hire someone, and that proof of coverage "must be received at CSLB's Headquarters within 90 days of the hire." Ninety days is not long if the hire was meant to be temporary and the paperwork was never started.
| What changed | What it triggers |
|---|---|
| Payroll paid during the term | Premium recalculated at audit on the actual payroll |
| Payment to a subcontractor with no certificate | Insurer charges for that subcontractor's services (Georgia) |
| A hire by an exempt California licensee | Exemption void; proof of coverage due at CSLB within 90 days |
| A gap in coverage in California | License suspension; work during it is unlicensed |
What to do if you are holding one
If you are the business with the policy, the question to answer before the term ends is narrow: did any money leave the business for labor, in any form, including cash, a 1099, or a favor that got paid. If the answer is yes, the audit will find it, and the time to price it is now rather than after the bill.
If you are the contractor who collected the certificate, the certificate is the beginning of the check and not the end of it. Verify it with the carrier or the state portal, and verify it again for the period the crew is actually on site, because the document you filed in March describes March.
Virginia's decision in February put a number on the exposure that most people assume away: four days.
Frequently asked questions
What is a workers comp ghost policy?
Industry shorthand for a workers' compensation policy written for a business that reports no employee payroll. It is bought so the business can hand a customer or a general contractor a certificate of insurance. It costs little while it holds, because premium is charged on payroll and the payroll reported is zero.
What happens at audit if you hired someone during a ghost policy term?
The payroll comes back into the calculation and the premium is recalculated on it. The audit's job is to replace the payroll reported at the start of the term with the payroll actually paid during it, so a term that was quoted on zero and ended on real wages produces an additional premium bill.
Is a ghost policy enough for the general contractor who asked for the certificate?
Not on its own, because a certificate reflects what the insurer said on the day it was issued. Georgia's insurance regulator tells contractors to verify a subcontractor's certificate through the state portal and to confirm that coverage continues for the whole time the subcontractor is on the job.
Can a general contractor be charged for an uninsured subcontractor's crew?
Yes. Georgia's regulator states that if you cannot show evidence a subcontractor had coverage, your insurer will charge for that subcontractor according to the services provided. Under OCGA 34-9-8(a), a principal, intermediate, or subcontractor is liable for compensation to any employee injured while in the employ of any of its subcontractors engaged upon the subject matter of the contract, to the same extent as the immediate employer.
Does a short job keep a worker off the employee count?
Not in Virginia. The Court of Appeals affirmed an award on February 24, 2026 in a case where most outside workers finished their portion of a remodel in four days or less, holding that anyone hired in the usual course of the business counts regardless of how briefly they worked.
