A "ghost workers compensation policy" is a misleading term. Many insurance agents will likely tell you that there's no such insurance product. If they give you that response, then ask them about a minimum premium workers compensation policy which is frequently used by sole proprietors or small businesses with no employees. These policies:
Provide minimal coverage: They're primarily used to meet contractual requirements or to provide proof of insurance.
Have low premiums: Due to the limited coverage, premiums are typically much lower than for policies covering multiple employees.
Can still provide coverage for the owners if they elect to be covered.
Eligibility for a minimum premium workers compensation policy typically includes:
Sole proprietors: Individuals who own and operate a business on their own.
Small businesses with no employees: This “no employees” rule applies to 1099’s and subcontractors (owners are not considered employees).
Here are several reasons why a small business should have workers compensation insurance:
Legal Compliance: Based on your state’s regulations, your business may be required to carry workers compensation insurance. Failure to comply can result in hefty fines and penalties.
Employee Protection: More than injuring an employee physically, a work related injury could hurt an employee financially as well. Workers compensation provides medical benefits, disability payments, and death benefits to employees injured on the job.
Business Liability: If an employee is injured on the job, your business could be liable for the ensuing medical expenses, lost wages, and legal fees. Without workers compensation insurance, your business will need to find a way to pay for these costs.
Potential Tax Benefits: Check with your tax professional to see if the cost of workers compensation insurance may be tax-deductible.
Overall, workers compensation insurance is a valuable investment for small businesses, providing both legal protection and peace of mind. It's important to carefully consider the potential benefits and drawbacks before making a decision.
If you're a sole proprietor or small business owner considering a workers compensation policy, talk with an independent insurance agent to understand your specific needs and options. They can help you determine if a minimum premium policy is suitable or if a more comprehensive policy would be better.
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