Most business owners with no employees do not need workers comp by law. What pushes a one-person business into buying it is almost never the statute. It is construction rules in a handful of states, a licence board, or a general contractor who will not let you on site without a certificate. Once you do buy it, two choices decide what you pay: whether you are included or excluded on your own policy, and whether anyone you pay during the year lacks their own coverage.
Get either wrong and a small policy can turn into a large bill. The thread that prompted this post is a one-person siding contractor in New Jersey whose policy was "only 8k" and who was then told he owed "almost 40k+," with a law firm writing to him. New Jersey's own rule is that a sole proprietorship needs coverage if anyone "excluding the principal owner" works for it. He may never have needed the policy at all. If you do hire help, the question of subcontractor or employee changes everything below, so settle that first.
Do you need workers comp if you have no employees? A 3-question test
If you answer no to all three questions below, you very likely do not need a policy. Answer yes to any of them and you need either a policy or the right exemption document for your state.
- Does your state or province require it for your trade, even with no employees? This is mostly construction. California, Florida and Ontario all have construction-specific rules covered below.
- Does a licence, permit or client contract ask for a certificate? General contractors, property managers and public agencies commonly do. The contract wins even where the law does not.
- Did you pay anyone else this year? A helper, a cousin for a weekend, a one-person sub without their own policy. For workers comp purposes that person can count as yours, even when you file them on a 1099.
Question 3 is the one owners skip. In the r/GeneralContractor thread from an owner who was exempt but needed a certificate for one project, the original poster asked: "So even if I am using 10-99 labor I need workers comp? I thought if I didn't have employees I didn't need it." One reply put it plainly: "If the prime contract requires it, then you will need it. The owner doesn't know, nor cares, what kind of labor you are using."
How an $8,000 owner-only policy became a $40,000 bill
The bill almost certainly came from the premium audit, not the policy price. Workers comp is quoted on estimated payroll and then audited after the term. The r/Insurance thread about the siding contractor is worth reading in full, because the insurance people in it list every way an owner-only policy goes wrong. These are anecdotes, not rulings, but they line up:
- The audit was ignored. "Another thing carriers will do is estimate an audit if the insured does not complete their worksheets," wrote one commenter. Another added that if the policy is cancelled before the final audit, it can be labelled unproductive, with a penalty they put at "anywhere from 200-500% depending on what is allowed by your State's DOI."
- Revenue went in as payroll. One commenter guessed he was "reporting his whole revenue as his payroll instead of his W2/1099 draw only."
- Helpers without certificates. Several assumed he used subs, since uninsured subs are billed "as if they were your employees." His son said he never had any.
- He was included when he could have been excluded. "I have very few customers that have workers comp when they are the owner with no employees. In my state the owners can be excluded," wrote an agent. Another pointed out that excluding himself means "his income is not considered in the audit."
The most practical advice in the thread: "request the audit paperwork and classification codes ASAP," because "these balances are often wrong or negotiable." The earlier lesson: a one-person business insuring its owner for years, when the law did not ask and an exclusion may have been available, may be paying for coverage it does not want. It sits in the same category as other quiet costs we cover in where a small business loses money.
Paying workers comp on yourself when you have no staff, or not sure what your last audit billed you for? Send us the policy and the audit and we will tell you in writing whether you are included when you could be excluded, whether payroll was estimated, and what to ask your agent to correct.
Your four options, and what each one costs you
A solo owner has four realistic choices, and the right one depends on why you need coverage in the first place.
| Option | What it is | Rough cost | Covers your injuries? | Main risk |
|---|---|---|---|---|
| No policy | You rely on the legal default | Nothing | No | A GC, licence or contract rejects you |
| Exemption document | A state form saying you have no employees | Low or no fee (Florida charges $50 for its construction exemption) | No | Not accepted by every GC or carrier |
| Ghost policy (owner excluded) | A workers comp policy with zero payroll | Minimum premium, $750 to $1,200 a year per Insureon | No | Uninsured helpers billed at audit |
| Owner included | You are the covered worker | Rate times your payroll, often with a floor | Yes | Premium based on a minimum payroll, can be high in risky trades |
On the ghost policy price, broker quotes vary. Insureon's ghost policy page says your "qualifying payroll is zero dollars" and the insurer charges "a minimum premium for a ghost policy, typically between $750 and $1,200 annually." In a 2020 video, a North Carolina agent said most ghost policies there go through the state rate bureau at a $1,500 minimum premium, $1,620 with higher limits, all due up front. Owners on Reddit quote numbers in the same range: one residential remodeler in r/GeneralContractor said "Get a ghost policy for $150/mo." A broker in a 2026 thread added a warning worth hearing: "Many carriers raised their minimum premiums for contractor class codes defeating the purpose of a ghost policy," while healthcare ghost policies could be "as low as $500 per year."
On including yourself, California shows why it gets expensive. The WCIRB, which sets the state's rating rules, says that when officers and partners are subject to coverage, "the annual payroll used for premium computation is subject to minimum and maximum limitations." For policies from September 1, 2025, that is a minimum of $63,700 and a maximum of $165,100. Draw $30,000 from the business in a slow year and you are still rated on $63,700. Other states run similar floors; ask your agent which one applies to you.
Excluding yourself is a formal step, not a checkbox. In California, WCIRB notes the individual "must execute a document, in writing and under penalty of perjury, waiving their rights under the Labor Code." Since July 1, 2018, a sole shareholder who is an officer of a private corporation is excluded from the definition of employee unless they elect coverage. How your business is set up changes these rules, which is one reason the incorporation question matters for comp as much as tax.
Why general contractors demand a certificate from a one-person sub
A GC asks for your certificate because, without one, their insurer can bill them for you. At the GC's own audit, payments to a sub who cannot prove coverage are usually treated as the GC's payroll. We cover the GC side of this, including how the back-premium is calculated, in tracking subcontractor insurance certificates.
That is also why exemption paperwork often does not satisfy them. New York is the clearest example. Its Certificate of Attestation of Exemption (CE-200) is for entities with no employees, but the Workers' Compensation Board says it "can only be used to attest to a government entity" and "CAN NOT be used to show another business or that business's insurance carrier that coverage is not required." So a New York sole proprietor can get a building permit with a CE-200 and still be turned away by a GC who needs something their carrier will accept.
A one-person sub in Pennsylvania described the workaround one GC used in the same r/GeneralContractor thread: without workers comp, the GC "had to write up a trade agreement signed by both parties or their insurance was going to consider me an employee for WC purposes and penalize them." Some GCs go the other way: one commenter back-charges uninsured one-person subs a percentage of their bill. If you are chasing this kind of work, the certificate is part of your price, the same as your tools. Our guide on getting work from general contractors covers the rest of what they check.
The ghost policy trap: it covers people you forgot about
A ghost policy starts with zero payroll, but it does not stay that way if you pay anyone who lacks their own coverage. This is the part the vendor pages skip, and it is how a cheap certificate becomes an audit bill.
The North Carolina agent explained it with an HVAC example. The owner buys a ghost policy to land a job. Later in the year he pays another HVAC contractor to help: "That subcontractor, whether or not he has insurance or not, can be covered under our HVAC guy's workers' compensation. So any pay that he sends that guy, unless he has workers' compensation as well, is automatically covered." In his words, "a ghost policy could really change from the start to the end." The auditor finds those payments in your bank statements and tax return, and bills them at your class code rate.
Owner stories from Reddit, each an anecdote:
- A GC in r/GeneralContractor said a carpenter "canceled his WC in the middle of a project" and it "cost me around 3k to cover him come audit time a year later."
- In one r/Contractor thread, an owner said he now subs out all his work on a "Ghost policy." Another owner in the same thread said the shops that look cheaper "are running ghost policies until it blows up on them."
The fix is dull and it works: before you pay anyone, get their certificate of insurance showing workers comp, a W-9 and a short signed agreement. How you pay them matters too; see the best way to pay subcontractors for keeping a clean record an auditor can follow.
State snapshots: where solo owners still have to carry it
The legal requirement for solo owners is decided state by state, and construction is where it bites. These are the rules we could confirm on each agency's own site this week. They change, so check yours before relying on it.
| Jurisdiction | Solo owner, no employees | Construction exception |
|---|---|---|
| California | Can file an exemption with CSLB if no employees | C-8 Concrete, C-20 HVAC, C-22 Asbestos, C-39 Roofing and C-61/D-49 Tree Service must carry it regardless. All licensees from January 1, 2028 |
| Florida | Non-construction sole proprietors with three or fewer employees not required | Construction sole proprietors must meet construction coverage rules. Exemption only for corporate or LLC officers with 10% ownership, up to three, $50 fee |
| New Jersey | Required only if someone "excluding the principal owner" performs services | No separate solo-owner mandate on the DOL page |
| New York | No employees: CE-200 exemption for government permits and contracts | CE-200 cannot be shown to a GC or its carrier |
| Ontario | Outside construction, owners not automatically covered | Independent operators in construction must be covered, with a home renovation exemption |
California's rule comes from CSLB's workers comp page, which also warns that "failure to maintain workers' compensation insurance coverage will result in the license being suspended." CSLB's bulletin on SB 1455 says the requirement for every licensee was "delayed from January 1, 2026, to January 1, 2028," and that until then, trades outside the five listed "can continue to claim exemptions if they have no employees." If you hold a C-39 and have been running without a policy, the licence is the problem, not the audit.
Florida's construction exemption page lists the officer route, and the state's education notice says that if a sole proprietor "engages in a construction-related activity," the business "must comply with the workers' compensation coverage requirements for the construction industry." For a Florida trade, being set up as an LLC or corporation is what makes an exemption possible at all.
Ontario: WSIB for owners with no employees
In Ontario, a construction owner with no employees usually must have WSIB coverage, unless every job is home renovation paid directly by the homeowner. Outside construction, the WSIB says business owners "aren't automatically covered by us" but can request optional insurance.
The WSIB treats you as an independent operator in construction if you are a sole proprietor or sole executive officer who performs or manages construction work, has no employees, works for more than one person in an 18-month period and reports as self-employed. If that is you, "you are required to have coverage."
The exemption is narrow, and one job can end it. The WSIB's own Q&A says that if you take "even one contract that is not a home renovation, you no longer meet the criteria for exemption," and must register, report and pay "on both the home renovation and non-home renovation earnings for a minimum period of three months." So a renovator who takes a single small commercial job is on the hook for a quarter of premiums on everything.
How the WSIB counts your earnings is also unusual. Insurable earnings are the amount you bill for labour: 100% of the contract if you supply labour only, 60% if you supply major materials and your records do not separate the labour, and 33.3% if you bring heavy equipment. Invoices that break out labour and materials can lower what you report. If you switch to renovation-only work, you can ask to close the account after the three-month minimum, but you have to contact them "within 10 business days" or you may be required to keep reporting. For a corporation with more than one officer, one executive officer who does no construction work can apply for an exemption, and only one per company.
Check your own policy in 10 minutes
Pull your policy's declarations page and your last audit, and check five lines. This is where most overpayment by solo owners shows up.
- Is the owner included or excluded? It will be listed by name, often on an endorsement. If you are included and your state allows exclusion, ask your agent what the premium would be without you, and decide whether you want the injury cover.
- What payroll is the policy estimated on? If it shows your revenue, or a round number far above your draw, the premium is inflated before the audit even starts.
- What class code are you in? One r/Contractor owner said his "first quote came back with everyone bucketed into the most expensive class on the book," and correcting the codes "knocked the rate down a real amount."
- What is the minimum premium? On a ghost policy, you are paying it. "Ask what the minimum premium is for the year," as one r/Contractor commenter put it, and compare two agents.
- What did the last audit add, and why? Look for estimated payroll (worksheets not returned) and for payments to people without certificates. Both are fixable next term.
Then add the certificate or policy cost into your prices. It is overhead like your vehicle and phone, and our guide to building overhead into your prices shows where it goes. Put your renewal date on the same list as your other policies so it gets reviewed rather than auto-renewed; a renewal tracker does that job.
If any of those five lines surprised you, that is the leak. Our free scan reads your workers comp declarations, your last audit and your payments to helpers, and gives you a written list: what to exclude, what was estimated, and which payments need a certificate before the next audit.
Can you sort this out yourself?
Mostly, yes. Deciding whether you are legally required takes one visit to your state agency's page and a look at your contracts. Getting an exemption is a form. Asking your agent to quote with you excluded is a phone call.
Where it stops being a DIY job is buying the policy. The top comment in the r/Insurance thread asking about cheap online quotes was "Work comp is not a DIY insurance product," and the advice that followed was the same from several agents: "Call an independent insurance agent in your area." Class codes, owner inclusion and minimum premiums are where online quotes go wrong. An independent agent can quote several carriers and tell you whether the ghost policy market in your state is still worth it for your trade.
The other point to call someone is a bill that already looks wrong. Get the final audit worksheet before you pay or argue, because it shows the payroll, the class code and any estimated figures line by line.
And if you are close to hiring your first employee, everything here flips: from the first hire, the legal default in most places is that you must carry coverage for them. Build that premium into your job pricing before you make the offer, not after the first audit.