What Missouri Contractors Need to Know Before Buying One.
If you’re a sole proprietor or independent contractor in Missouri, there’s a good chance a general contractor has asked you for a certificate of insurance proving you carry workers compensation coverage. And if you’ve searched for the cheapest way to get that certificate, you’ve probably come across something called a ghost policy.
Before you buy one, you need to understand what you’re actually getting — because it’s probably not what you think.
What Is a Ghost Policy?
A ghost policy is a workers compensation policy issued to a business with no employees, where the owner is excluded from coverage. The policy exists almost entirely to generate a certificate of insurance so you can get on a jobsite or satisfy a contract requirement.
Here’s the part most buyers miss: because the owner is excluded and there are no employees, the policy covers no one. If you’re hurt on the job, your own ghost policy pays you nothing. You bought a certificate, not coverage.
Why Do Contractors Buy Ghost Policies?
The honest answer is misdirection. General contractors require proof of workers compensation from their subcontractors because, under Missouri law, a GC can be held responsible for injuries to an uninsured subcontractor’s workers — and the GC’s own carrier will charge premium for any sub who can’t produce a certificate. The Missouri Department of Labor confirms this directly: the general contractor can require proof of coverage precisely because an uninsured sub becomes the GC’s financial problem.
The Audit Trap: Where Ghost Policies Get Expensive
Ghost policies are written on what’s called an “if-any” basis — meaning the premium assumes zero payroll, but the policy is obligated to cover employees if any exist during the policy period.
That’s where the trap springs. If you pay a helper for a weekend, bring on a laborer for one big job, or use a subcontractor who can’t produce their own certificate of insurance, that payroll belongs on your policy. Your carrier will find it at audit — that’s what the audit is for — and you’ll receive a bill for premium on payroll you never planned for, at your classification’s full rate.
We’ve seen contractors buy a ghost policy for a few hundred dollars and end up with an audit bill several times that amount. The “cheap” policy is only cheap if you truly work 100% alone, all year, with no help of any kind. Very few contractors actually operate that way.
Is a Ghost Policy Ever the Right Choice?
There are narrow situations where one makes sense: a genuine one-person operation that never hires help, never uses uninsured subs, and simply needs to satisfy a contract requirement. If that’s truly you, a ghost policy is a legal tool that exists for exactly that purpose.
But go in with your eyes open. You are buying compliance paperwork, not protection. If you’re injured on the job — the single biggest financial risk a self-employed tradesperson faces — the policy you’re paying for will not pay your medical bills or replace your lost income.
What to Do Instead
If you want actual protection, ask an independent agent about a minimum-premium workers compensation policy with the owner included. It costs more than a ghost policy, because it covers a real person doing real work — but it means an injury doesn’t end your business and your income at the same time.
At minimum, if you do carry a ghost policy, keep it honest: no helpers, no cash labor, and collect a current certificate of insurance from every subcontractor you use, every time. That’s what keeps the audit from becoming the most expensive part of your year.
At MBG Insurance, we’ll tell you the truth about what a policy does and doesn’t do before you buy it. If you’ve been asked for a certificate of insurance and aren’t sure what kind of policy you actually need, call our Springfield office at (417) 773-7822 — we work with contractors and subcontractors across Missouri every day, and we’d rather help you get it right than sell you a piece of paper.
To lear more about workers compensation visit our Workers Compensation page.
Kirk Reisner | Partner & Chief Financial Officer, MBG Insurance
Kirk has worked in the insurance industry since 1998, starting as a claims adjuster before becoming a licensed agent in 2001 — this August marks his 25th year as an agent and 20th as an independent agency owner. He holds a B.S. in Insurance and Risk Management from Missouri State University and the Associate in Claims (AIC) designation. Kirk works with contractors and small business owners across Missouri from MBG’s Springfield office.
📞 (417) 218-0762 | ✉️ kirk@insurancenerd.net
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