An employer must compensate workers who receive injuries or encounter occupational diseases during work. Such compensation is payable under the Workmen’s Compensation Act.
An employer may obtain an insurance policy to cover such liability. The premiums are usually payable based on wages. Therefore, it is also known as ‘Employers’ Liability Insurance.
Standard Cover in a Workmen Compensation Policy
The policy covers any insured employee who may sustain personal injury by accident or disease arising out of and during his employment. The company will indemnify the insured against all sums for which the insured is held liable to pay to his employees under Workmen’s Compensation Act, 1923, the Fatal Accidents Act 1855, and Common Law.
A Workmen Compensation Policy provides insurance cover in the following situations: –
- Permanent total disablement,
- Permanent partial disablement,
- Temporary disablement,
- Additionally, legal costs and expenses incurred,
- The policy can also be extended to include medical expenses for necessary treatment.
What is the Scope of Insurance Cover in this Policy?
The amount of compensation an employer has to provide frontline workers is as follows:
Death of the Worker
50% of the worker’s monthly wages multiplied with relevant factors, or Rs 1,20,000, whichever is more.
Permanent Total Disability
60% of the monthly wages, multiplied by the appropriate factor, or Rs 1,40,000, whichever is more.
Permanent Partial Disability
In such cases, the amount payable is a percentage of the loss of earning capacity due to the injury. These injuries are mentioned in Part II of Schedule I of the Act.
25% of the employee’s monthly wages.
Eligible employers must get a Workmen’s Compensation policy that provides comprehensive protection to their employees. Specific documents are needed to qualify for this policy and a structured process to file claims.
Exclusions in Workmen Compensation Policy
Some of the standard exclusions in a workmen’s compensation policy are:-
- Any injury by accident or disease is directly attributable to war invasion and perils.
- Any liability towards the contractor’s employees.
- Willful disobedience of safety rules.
- Accidents due to consumption of alcohol or drugs.
- Injuries caused outside office premises.
- Accidents involving non-workers.
Bottomline: Why business should buy Workers’ Compensation Insurance?
All states, with few exceptions, require businesses with employees who are not owners to purchase workers’ compensation coverage for those employees. Businesses that fail to provide workers’ compensation coverage can face severe and costly repercussions, including payment of claims out of pocket, fines, imprisonment, and possibly losing the right to conduct business in the state.