What is a Ghost Policy?

Have you heard the term Ghost Policy?

It is typically referred to in regards to workers compensation insurance.  A Ghost Insurance Policy is a term used to describe a specific type of workers’ compensation insurance policy. This type of policy is issued to individual business owners that have no direct coverage value. It can be a great policy for small contractors and subcontractors who have no employees or subcontractors.

Ghost Policy

What is a Ghost Policy?

A Ghost Policy is a minimum earned premium policy. A policy of this nature commonly costs between $750 and $1000 annually. This is depending on the state the policy is issued and several factors related to the industry the business operates.  One major difference from a traditional workers comp policy is that a Ghost Insurance Policy has no payroll calculated into the premium.  It also excludes all owners from the policy.  This is where the term “Ghost”comes from.  Now the premium will vary by carrier and includes the state expense constant, There are minimum premium amounts required to administer a policy.

Why might someone want a Ghost Policy?

While many business owners might think it is a waste of money to purchase this type of a policy, but it may be a preferable alternative to going without coverage for a number of reasons.  A Ghost Policy enables a business owner to have a certificate of insurance issued.  Many contracts require a certificate of insurance in order to secure financing and to do business legally in many states.  In addition, a Ghost Insurance Policy can cost a fraction compared to a policy including the owner. Also, in most cases, a Ghost Policy provides employer liability protection in the event an employee is hired or a payment is made to an uninsured subcontractor. Uninsured Subcontractors are especially important to protect your self and your business from, even if you only interact with subcontractors infrequently. Trusting that a subcontractor is self insured is a good way to get your business in to a situation no business owner wants to be in.

Ghost policies don’t provide coverage, so why would I want one?

The biggest reason small contractor or subcontractors benefits from a Ghost Insurance Policy is to meet state legal requirements or to provide a certificate of insurance to another client or general contractor. Many other businesses, customers, and other contractors require an independent contractor to provide a certificate of insurance in order to enter into a contract with them. The fact that the business does not hire employees is inconsequential to them. They want to have a certificate of insurance in place to make sure they are not held liable for damages or bodily injury that occur within the contract. Many independent contractors do not employ any other people.  These contractors want to prevent high workers compensation premiums just to cover themselves with traditional comp coverage. Unfortunately, in some states these contractors are required to show some proof of insurance coverage. In most instances, a Ghost Policy will help them meet these requirements the most cost effective way.

Business Owners Policy

3  Reasons why Small Businesses Need a Business Owners Policy (BOP)

A Business Owners Policy, typically includes three types of insurance. Those three types of insurance include Property, Business Interruption, and liability protection. There are additional coverages your business can purchase to tailor the policy to fit your business’s specific needs. Two common additions include inland marine and data breach coverage. No matter the size or scope of your business, a BOP is almost always the best way to properly insure your business. Here are 3 reasons you should consider a BOP.

BOP

 

A BOP will ensure no gaps in coverage

Because with a Business Owners Policy, you bundle several products together, your business is less likely to have a claim not be covered because of a gap in coverage. A gap in coverage occurs when you purchase two products from different carriers and each carrier has an exclusion to their policy. If both policies have an inclusion for the loss, it may cause the loss to not be covered at all. Even if the loss is covered it can slow down the response time for the claim because the insurance carriers have to determine who is ultimately responsible for the claim. When you purchase a BOP, it will speed up the amount of time to process a claim and do the best job of preventing a gap in coverage.

A BOP will make insurance more affordable

Keeping expenses as low as possible is extremely important for the long-term success of any business. A Business Owners Policy allows you to keep the price of premium lower because insurance companies are more likely to dig deeper for credits and discounts when they know they are quoting multiple policies through your business.

A BOP can be modified to fit your needs

Business Owners Policies are designed with a specific industry in mind. Insurance carriers have loads of data about claims in each particular industry and with that data they know with a high probability which coverages each industry is most likely to need. This data can help a business owner to know what types of insurance they need and what types they can do without. If your business is an exception to the rule, your insurance agent can help you fine tune your specific package to meet the unique needs of your business. This is something not offered from most traditional insurance policies.

 

12 terms to familiarize yourself with before your next renewal.

Twelve tips for the next time you purchase Small Business Insurance.

Insured

The person, group, or organization whose life or property is covered by an insurance policy.

Insurer

Insurance company that issues a particular insurance policy to an insured. In case of a very large risk, several insurance companies may combine to issue one policy.

Named Insured

Any person, firm, or organization, or any of its members specifically designated by name as an insured(s) in an insurance policy.  .

Learn these terms to help your business at your next commercial insurance renewal.

Premium

The price or amount paid for insurance.

Claim

A formal request to an insurance company asking for a payment based on the terms of the insurance policy.

Carrier

A company that offers and underwrites insurance policies.

Insurance Carrier

Policy

A document detailing the terms and conditions of a contract of insurance.

Underwriter

The person who decides whether to provide insurance and under what terms.

Agent/Broker/Producer

A person licensed by a state and employed by an insurance company to sell insurance policies on the company’s behalf.

Find out if you really need Umbrella Insurance Coverage at www.myinsurancequestion.com

Umbrella Coverage

Umbrella coverage protects your business when your existing liability insurance policy limits can’t cover all the expenses of a claim.

Hired and Non-owned Auto

A coverage that is commonly added or endorsed onto a commercial auto insurance policy. This endorsement adds additional coverages for the insured in the event there becomes a liability issue for an automobile accident involving a vehicle they don’t directly insure (rentals or employee owned cars).

Experience Modification Rating

An employers’ Experience Modification Rating refers the factor calculated from actual loss experience. It is used to adjust the businesses premiums (higher or lower) based on the businesses loss experience relative to the average underlying manual premiums for workers compensation coverage. The Modifier (Mod) compares the insured experience to the average class experience.

 

Additional Terms to consider familiarizing yourself with before your nest renewal

Waiver of Subrogation

A Waiver of Subrogation is a contractual provision whereby an insured waives the right of their insurance carrier to seek redress or seek compensation for losses from a negligent third party.

Certificate of Insurance

certificate of insurance is a document that is used to provide info on specific insurance coverage and provide verification insurance is in place at the time of issuance. The certificate contains the types and limits of coverage, the carrier, policy number, named insured, and the policies’ effective dates.

Certificate Holder

The certificate holder is the person, business, or nonprofit organization who is provided with a certificate of insurance to prove coverage is in place at the time of issuance. The certificate holder will be notified if at any time the policy is cancelled before the listed policy effective date.

Additional Insured

The Additional Insured is the person or organization who is not automatically included as an insured on an insurance policy, but who is included under the policy at the request of the named insured.