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Understanding the Importance of Workmen’s Compensation Insurance

Published On Dec 11, 2019 5:30 AM By Yamini Sharma

Employers are responsible for making their workplaces safe. However, there are times when accident take place. When the same happens, it becomes the responsibility of the employer to provide workmen’s compensation insurance.

What is Workmen’s Compensation Insurance? 

Workmen’s compensation insurance is an insurance type that protects an employee against injury or death during the job time. 

Note that The Workmen’s Compensation Act, 1923 is one of the earliest social security legislations in our country, enacted so as to make the employer liable to pay compensation to those employees who are affected, or to their dependents in case of death. In case of any injury or accident due to and in course of employment and resulting in partial or complete disablement, or death, the compensation is paid. 

Worker’s compensation insurance, like any other insurance policy comes with the requirement of premium. However, the only difference is that in case of workmen’s compensation insurance, it is the employer that bears the cost of premium. Keep in mind that the premium payable for workmen’s compensation insurance is based on the job profile of the employee, experience, and the number of claim that have been paid in the past.

The two prime purposes of workmen’s compensation insurance are: 

Ensuring that the injured workers get superior medical care and compensation for a part of the income that they lose while not being able to return to work. 

Protecting the employers from lawsuits by workers those injured while working. 

Why Workmen’s Compensation is Important? 

Workmen’s compensation insurance is mandatory in various countries all across the globe. Note that even if the organisation possesses one worker, it is important for the former to cover the employee under worker’s compensation insurance. 

Workmen’s compensation insurance is an affordable solution to secure the employees. Additionally, it is beneficial for the employer for saving extra expenses. 

Workmen’s compensation insurance supports the employer in keeping the employees on the safe side. It can help an employer ensure the safety of the employees or workers at a pocket-friendly rate as well as limit the liabilities against any adverse situations involving injury or death of an employee. 

Coverage under Workmen’s Compensation Policy?

The worker’s compensation policy or workmen’s compensation policy provides cover for: 

  • Bodily injury caused due to an accident during the course and scope of employment
  • Bodily injury caused due to a disease or aggravated by the conditions of the employment
  • Death
  • Temporary disablement 
  • Permanent total or partial disablement
  • Legal costs and expenses incurred with the organisation’s consent

Add-on covers provided: 

If the contract is for labor only, then tariff rate on total contract amount
If the contract is for labor and materials, the labor value is determined as per merits, subject to a minimum of 75% of contract amount. 

Exclusions under Workmen’s Compensation Policy?

  • Non-fatal injuries
  • Injuries caused due to war, riot, or nuclear material/weapon
  • Initial 3 days of disablement and total disablement lesser than 28 days 
  • All injuries that do not result in partial disablement for more than 30 days 
  • Liabilities faced for employees of the contractors
  • Employees not considered as workmen as per Workmen’s Compensation Act
  • Diseases specified in part (C) of Workmen’s Compensation Act
  • Any changes made in the statue of the provisions after start of the policy
  • Accident or injury caused under the influence of drug or alcohol
  • Injuries caused because of internal removal of security device or due to carelessness of security device

How to Claim Workmen’s Compensation Insurance?

As an employer, you are required to firstly, inform about the incident to the authorised workmen compensation commissioner of your area. Then, file the first information report with the police. Lastly, inform your insurer about the incident.

P.S. Workers Compensation Act is equally applicable for women employees as well. 

Tips to Lower the Premium for Workmen’s Compensation Insurance

Highlighted below are some of the tips to lower premium for workmen compensation insurance:

  • Create a written document carefully explaining how safely a job needs to be done. This is probably one of the best tips to help you in lowering your premium.
  • Typically, the premium calculation for workmen compensation is dependent upon the job classification and payroll. Therefore, it is important to show a clear job description alongside a well defined job classification and payroll projection for a period of 12 months. Moreover, in order to prevent cancellation, keep things as transparent as possible as workmen compensation insurance is an auditable plan.
  • Proper training should be given to employers related to the usage of some equipment that can cause harm to or injure their workers.
  • At the time of making a budget for your tasks and operations, ensure that you are allocating a small percentage of the budget for the work safety training of all the concerned workers and employees.
  • At the time of audit, do not hide any material information or fact, be transparent and honest regarding the risks involving your workers or employees in their work.

In case, the company does not have a workmen compensation insurance, then it is required to meet with the possibility of dealing with high healthcare bills or lost wages, when an employee gets injured and is not ready to work. It is also said to be an illegal act in India, where workmen compensation is important by the law.

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Workmen’s Compensation Insurance is equally important for the employer as well as the employee. If you are an employer, make sure you take proper measures to safeguard your workers by buying workmen’s compensation insurance. 

Note that this is an informative article. InsuranceDekho does not provide Workmen’s Compensation Insurance. 

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