A workers’ comp ghost policy in NC is a stripped-down workers’ compensation policy that a one-person business buys so it can produce a Certificate of Insurance for general contractors, even though no one is actually covered under it. The owner gets no medical, disability, or wage-replacement benefits. Annual premiums usually run between $800 and $1,600, and the policy exists for one purpose: to let a sole proprietor, single-member LLC, or small partnership take subcontracting work without the general contractor above them absorbing their injury risk.
Why General Contractors Insist on One
North Carolina only requires workers’ compensation coverage when a business regularly employs three or more people in the same operation.1North Carolina Industrial Commission. North Carolina General Statutes 97-2 – Definitions A solo operator has no statutory obligation to carry a policy. The pressure comes from somewhere else.
Under N.C. Gen. Stat. § 97-19, a contractor who sublets work without first obtaining a certificate showing the subcontractor carries workers’ compensation becomes liable for injuries to that subcontractor’s employees. That liability attaches even if the sub has fewer than three workers and wouldn’t otherwise need coverage.2North Carolina General Assembly. North Carolina General Statutes 97-19 – Liability of Principal Contractors If you hire a helper on the side and that helper gets hurt, the general contractor pays the claim.
So most general contractors refuse to award contracts, or release payments, to any sub who can’t hand over a current certificate. A roofing sole proprietor who swears he’ll never hire anyone still can’t get on the job without one. The ghost policy produces that certificate at the lowest price the market offers.
Who Can Actually Use a Ghost Policy
The typical buyer is a sole proprietor, a single-member LLC owner, or a partner in a small firm doing subcontract work in construction or a related trade. Under North Carolina workers’ compensation law, these individuals aren’t automatically counted as employees of their own business.3North Carolina Industrial Commission. Information for Employers There’s nothing for a workers’ comp policy to attach to, which is where the “ghost” name comes from.
Corporate officers sit in a different spot. N.C. Gen. Stat. § 97-2(2) treats every executive officer of a corporation as an employee for workers’ comp purposes by default. The corporation can specifically exclude an officer in the insurance contract, and the exclusion runs for the policy term.1North Carolina Industrial Commission. North Carolina General Statutes 97-2 – Definitions A single-officer S-corp with no other workers can use that election to buy a ghost policy instead of full coverage. The exclusion has to be affirmatively checked on the application. Skip it, and the carrier will rate the premium against the officer’s earnings and you no longer have a ghost policy.
You’ll see this requirement most often in residential and commercial construction, but it also shows up in landscaping, electrical, plumbing, HVAC, and anywhere larger companies subcontract portions of a job.
What It Costs
Annual premiums generally land between $800 and $1,600. That’s the minimum premium the assigned carrier charges to issue and administer the policy for a year, regardless of the zero payroll underneath it. The number reflects paperwork and overhead, not risk.
Many general contractors also require a waiver of subrogation endorsement, which blocks the workers’ comp carrier from going after the GC to recover claim costs. A blanket waiver typically adds a minimum of around $300, or two to three percent of the policy’s net rates. A project-specific waiver runs less, usually $100 to $250. Ask the GC what they expect before you bind the policy so the full cost is accounted for.
What You Get and What You Don’t
You, the owner, get nothing. A ghost policy provides zero medical, disability, or wage-replacement benefits for a sole proprietor or LLC member. Break an ankle on the job and the policy pays none of the hospital bill and none of your lost income. Its only output is a Certificate of Insurance that satisfies § 97-19.
Corporate officers who elected exclusion under § 97-2(2) are in the same position: the policy is in force, the officer is not an employee during the exclusion period, and no benefits flow.1North Carolina Industrial Commission. North Carolina General Statutes 97-2 – Definitions Anyone buying a ghost policy still needs their own health insurance and disability coverage. The ghost policy replaces neither.
The real protection sits upstream, with the general contractor who collected your certificate.
How to Buy One
Ghost policies in North Carolina almost always run through the assigned risk pool administered by the North Carolina Rate Bureau, because voluntary carriers have little reason to write a zero-payroll account. A licensed agent handles the submission and must certify on the application that the employer couldn’t be placed in the standard market.4North Carolina Rate Bureau. Rule 4 – Assigned Risk Plan Rules
The form is the ACORD 135 NC, specific to the North Carolina Workers Compensation Insurance Plan. You’ll need to supply:
- Federal Employer Identification Number (most carriers require one for identification).
- Estimated annual payroll, reported as zero.
- For a corporate officer, the exclusion election, checked on the application. Sole proprietors and LLC members aren’t employees by default, so this step is mainly for incorporated businesses.
- Business formation documents: articles of incorporation, articles of organization, or equivalent proof of structure.
- Prior insurance history, including any previous workers’ comp carriers and policy numbers.
Applications go through the NCRB’s ManageAR portal, by mail, or by hand delivery to the NCRB offices.4North Carolina Rate Bureau. Rule 4 – Assigned Risk Plan Rules An upfront deposit premium is due at submission. Once the NCRB assigns a carrier, policy documents issue and the Certificate of Insurance usually follows within a few business days. That certificate is what you forward to any general contractor before starting work.
The Annual Audit
Every workers’ comp policy, ghost or otherwise, is audited at the end of its term. The carrier confirms that your payroll really was zero. For a ghost policy the audit is usually quick, but you have to cooperate.
Expect requests for tax returns or Schedule C filings, any 1099 forms you issued, bank statements, and details on any subcontractors you paid. If you paid someone during the policy year and can’t produce a certificate of insurance for that person, the auditor will reclassify those payments as payroll and bill you additional premium at the applicable classification rate.
Skipping the audit backfires. Carriers can add premium surcharges, non-renew the policy, and send unpaid balances to collections. Any outstanding audit balance will also block a future assigned risk application through the NCRB until it’s cleared.4North Carolina Rate Bureau. Rule 4 – Assigned Risk Plan Rules Keep clean records throughout the year.
When the Ghost Policy Stops Working
The moment you hire anyone, the policy no longer matches reality. You need to notify the carrier and move to a standard workers’ compensation policy that actually covers your worker. The statutory threshold for mandatory coverage is three regular employees, but the practical trigger comes earlier: under § 97-19, the general contractor above you is on the hook for your employees’ injuries if your coverage doesn’t match your headcount.2North Carolina General Assembly. North Carolina General Statutes 97-19 – Liability of Principal Contractors GCs don’t tolerate that.
The penalties for operating with employees and no coverage are serious. N.C. Gen. Stat. § 97-94(b) sets a penalty of one dollar per employee per day for failure to secure required compensation, with a floor of $50 and a ceiling of $100 per day the violation continues. Willful failure to carry required coverage is a Class H felony; neglecting to do so is a Class 1 misdemeanor.5North Carolina Industrial Commission. North Carolina General Statutes 97-94 – Employers Required to Give Proof of Compliance An uninsured employer also remains personally liable for the full cost of any employee’s workers’ compensation claim.
If you aren’t sure whether someone you’re paying is an employee or an independent contractor, treat them as an employee and get coverage. Misclassification is what the North Carolina Industrial Commission looks for.
Renewal
A ghost policy runs for one year, and renewal in the assigned risk pool isn’t automatic. Work with your agent to resubmit before the expiration date. A lapsed policy means no current Certificate of Insurance, and an expired certificate reads the same as none to a general contractor. Keep the dates in front of you and respond to carrier correspondence quickly. The policy is simple by design; the only real failure mode is forgetting it exists.