Ghost Policy? (MN Contractors Only)
Don’t get “spooked” by this Minnesota workers’ compensation policy! A “Ghost Policy” is a term used to describe a Minnesota Workers Compensation Insurance Policy where the company / person purchasing the policy has no employees and chooses to Exclude themselves from Coverage. This type of policy is common with sub-contractors in the construction industry. The sub-contractors are typically required by the General Contractor, who hired them, to provide a certificate of insurance. It is common practice to not allow the sub-contractor to start or receive a check without the certificate of insurance being received.
How it works…
We sell ghost workers comp policies quite often here at www.insuringminnesota.com. We must re-iterate that the coverage is positioned to provide “NO” coverage for any one at the base rate. The key to that statement is the base rate.
So… Mr. sub-contractor purchases a “Ghost Policy” because they are required to have workers comp to work for a company or individual. The rate for carpentry in Minnesota as of 3-25-16 start at:
- $673.00 for the state minimum of 100,000/100,000/500,000 in coverage · $730.00 for coverage of 500,000/500,000/500,000 in coverage · $834.00 for coverage of 1,000,000/1,000,000/1,000,000 in coverage
In the ideal world, at the end of the annual policy term the company will audit the policy and refund everything but the expense constant of $200 or so. The end result is that certificates of insurance for the year cost $200. Do they hang on to your money all year? Yes… Do you have to pay the renewal premium prior to getting the refund? Yes…
This base coverage does NOT include coverage for any employee wages. If there were employee wages the base pricing would not be sufficient to properly quantify the cost of the policy.
MOST times, the owner of the company exempts themselves from coverage to mitigate the additional cost. Example: a $673.00 workers comp policy provides the business coverage but provides NO COVERAGE to the business owner if he were to get hurt on the job. If the business were to hire an employee or pay a sub-contractor who does NOT have a workers’ comp policy, the workers comp policy WOULD provide coverage to the employee or Sub… The catch is at the time the worker’s comp policy was audited, there would be additional premium due.
With a ghost workers comp policy, the best scenario is to have NO EMPLOYEE PAYROLL and NO PAYMENTS to SUBs that are not insured with their OWN workers’ comp policy.
Annual pricing examples as of 3-25-16:
- $673.00 Carpentry 5645 for the state minimum of 100,000/100,000/500,000 in coverage
- $478.00 Drywall Installation 5445 for the state minimum of 100,000/100,000/500,000 in coverage
- $673.00 Handyman 5645 for the state minimum of 100,000/100,000/500,000 in coverage
- $836.00 Nanny / Inservent / Pool Boy, Full Time or $391.00 for part time. The state minimum of 100,000/100,000/500,000 in coverage
- $646.00 Siding Installation 5538 for the state minimum of 100,000/100,000/500,000 in coverage
- $652.00 Painting 5474 for the state minimum of 100,000/100,000/500,000 in coverage
- $600.00 Masonry 5022 for the state minimum of 100,000/100,000/500,000 in coverage
Disclaimer: Since we are not attorneys we can’t give legal advise, but we can share insurance information and opinions on company & state issues.