November 16, 2021

Workmen’s Compensation Insurance

Workmen’s Compensation Insurance

Workmen's Compensation Insurance, also known as Employees' Compensation Insurance or Workers' Compensation Insurance is a Business Insurance policy that helps organisations pay compensation to their workers in the event of any workplace accident that results in their injury, disability, or death.

Industrialisation brought the advent of highly advanced and complex machinery. And as much as this led to our progress as a country, workers’ exposure to danger also increased. The risk of serious bodily injury, and in some cases, even death due to hazardous working conditions forced the government to pass the Workmen’s Compensation Act, 1923.

According to this act, employers are responsible for ensuring a safe and hazard free environment for their workers/labourers and for compensating them in the event of serious injury, disablement, or death caused by accidents that occur during the course of their employment. This applies to all industries mentioned under the act.

This liability is mandatory for the employer to bear. Any non-compliance can land them in legal trouble, and may even lead to their business getting shut down. Clearly, the risks associated with such a liability are too colossal to ignore. And that’s where Workmen’s Compensation Insurance can help.

Workmen’s Compensation Insurance is designed to help employers meet their statutory liability for the welfare of their workers as stated in the aforementioned Workmen’s Compensation Act 1923, the Fatal Accidents Act 1855, and Common Law. It can be taken by a Private or a Public Company, a Partnership Firm, or by any Trading Entity operating in India.

It enables the employer to provide sufficient compensation to employees or their families in case of bodily injury leading to :

  • Death
  • Permanent total disability
  • Permanent partial disability
  • Temporary disability

Note : Workmen's Compensation Insurance only covers accidents that occur during the course of or as a result of the workers’ employment with the insured employer. Here, employees under the Doctrine of Notional Extension (hypothetical extension of employment period in some circumstances for the purpose of provisional benefits) are also covered. For example, any injury suffered by a worker while travelling during working hours and for work purposes will fall under the Workmen’s Compensation Act.

Apart from the basic covers listed above, employers can also get the following extensions to their policy by paying additional premium :

  • Contractual / sub-contractual employee coverage - this extension can be added by declaring it in the policy schedule
  • Occupational diseases - as mentioned in the Workmen’s Compensation Act of 1923, these are diseases which arise during the course of or as a result of employment
  • Medical Expenses - here, reasonable medical, surgical and hospitalisation expenses are covered
  • Some insurers also offer a Terrorism cover

If these add-ons are not specifically opted for, they remain excluded from the scope of this policy.

This policy will not offer any compensation or indemnity to the employer for:

  • Accidental injury or disease directly caused by an act of war or related events
  • Injuries that do not result in fatality or disablement for a period exceeding 3 days
  • Employees of the insured’s contractors (unless specifically declared and covered)
  • Employees who are not workmen as per the laws
  • Any liability of the insured to a third party based on an agreement between them

It’s mandatory for certain businesses to get Workmen’s Compensation Insurance. This policy is required by all manufacturing, trading, mining, construction and transport undertakings, along with factories, plantations and servicing setups. All floor workers and office staff must be covered under this policy.

Workmen's Compensation Insurance is one of the most important Business Insurance policies that every organization, irrespective of its size or industry, needs to purchase. Worker injuries are a common occurrence in India and these often result in hefty medical or hospitalization expenses that need to be borne by the worker. Workmen’s Compensation Insurance helps employers deal with such risks more easily.

  • This policy helps provide quick and hassle-free payment to workers for medical expenses, cost of hospitalization, or loss of wages as a result of an accident at the workplace. It also helps workers get back to work after sustaining an injury
  • This policy helps organizations fulfil their legal obligation laid out by the Workmen's Compensation Act and the Fatal Accidents Act, keeping them out of any statutory trouble
  • Companies also get protection from lawsuits or additional claims related to workplace incidents, as their legal liability is completely covered under their Workmen’s Compensation policy. Once a claim is settled, workers can no longer file for additional compensation via a lawsuit or any other form of legal action

Workmen's or Employees’ Compensation Policy is thus extremely beneficial to both employer and employee. By purchasing this policy, businesses showcase that they take their workers’ welfare seriously and are compliant with the country's laws and regulations. This in turn makes the business appear strong, stable and effectively managed to future employees and investors.

Workmen's Compensation is one of many Liability Insurance policies that most businesses need. Learn more about Liability Insurance here

Opinions, conclusions and statements of intent expressed in this article are that of the author and Verak does not accept liability for the views expressed unless confirmed by an authorized representative of the Company independently of this communication.