Is a Workman Compensation Insurance policy compulsory?

Workmen's compensation policy is a legal mandate that came into existence under the Workmen Compensation Act 1923. The legislation states that every employee has the right to access workmen's compensation in the event of injury, disability or disease during employment or due to the nature of their employment.

Moreover, in the event of their demise, the compensation policy ensures that their immediate dependents are financially taken care of and provided a financially sound environment for their living.

Yes, the workmen's compensation policy is compulsory all across India under the Workmen Compensation Act 1923. The law requires employers to compensate their employees fairly in the event of injury, illness or death due to a work-related hazard. Any employer who fails to provide this compensation must face a legal lawsuit and pay penalties.

-Reasons Why Employer Liability for Compensation is Required

• Workers compensation insurance protects employers and organisations against lawsuits related to employee injuries.

• The insurance acts as the safety net for both the employees and employers.

• Many policy providers provide coverage for temporary and contract employers, too.

• Workmen's compensation insurance also covers death benefits in the event of an employee’s demise during employment.

• Even when an employee is unable to work due to injury or illness, the policy covers their monthly wage until they return to the workforce.

• The employer might have to pay fines and penalties for not having a workmen's compensation policy, which can be expensive for the business.

-Also Read: How to Apply for Workers Compensation?

-Medical Treatment Policy

If an employee gets injured or catches an illness during employment, they can file for workmen's compensation for medical treatment. The medical treatment policy will pay for the employee’s doctor’s appointments, medications, hospital and emergency room visits, recovery equipment, therapy and rehabilitation.

Moreover, if the employee incurs serious injuries, the employee will pay for their ongoing treatment, which is also covered under the workmen's compensation plan. Additionally, if the work-related injury leads to another illness or injury, the cost of treatment for that is also covered under the policy.

-Disability

• Sometimes, work-related injuries can leave the employee disabled for some time, affecting their livelihood. The work-related disabilities are categorised in the following categories for better understanding:

• Temporary total disability is when an employee is completely disabled for a temporary period but can return to the workforce.

• Temporary partial disability means when an employee is injured but still can work with a reduced workload.

• Permanent total disability is when the employee is rendered completely disabled and can never return to the workforce again.

• Permanent partial disability means that the employee has sustained injury and can return to the workforce but will not be able to work in the same capacity as earlier.

• The workmen's compensation policy provides for various disabilities differently. For example, if an employee is temporarily disabled, then the policy will cover their cost of livelihood while they are away from the job. However, if the employee is permanently disabled, then the policy needs to provide for their finances for a lifetime.

• It should be noted that the compensation amount for permanent disability differs from state to state and as per the policy coverage, too.

-Rehabilitation

Rehabilitation is crucial for disabled and injured employees; workers compensation insurance provides for it. It includes covering the cost of their physical therapy, skill sessions to become employable again and much more. The employee might also require transferable skill analysis, which will help them find new roles with their current and newly learned skills.

In such cases, employers appoint counsellors and admit employees to vocational rehabilitation for at least two years. During this time, employees can still receive financial benefits for their lost employment.

-Death and Funeral Services

If, due to an unfortunate event, the employee loses their life during employment, then the workmen's compensation policy provides for their funeral services. It includes the cost of funeral expenses and lost income.

Moreover, compensation is provided to the direct dependents of the deceased employees. However, most insurance plans have limits to compensation, which differ from state to state. Thus, it should be checked before buying any policy.

-Lost Income

If an employee takes time off from employment due to work-related injuries or illness, then the workmen's compensation replaces a part of their income. If the employee loses their life during employment, the compensation goes directly to the dependants again, and the amount received by the beneficiaries depends on state policies.

Also Read: 10 Questions of Workmen Compensation Insurance Answered

-Workers Compensation Coverage Inclusions

• Bodily injuries due to any accident that is sustained during the period of employment

• Bodily injuries resulting from diseases or work environment

• Partial or total permanent disability

• Temporary disability or death

• Legal expenses incurred with the company’s consent

-Workers Compensation Coverage Exclusions

• Injuries occurred due to war, enemy invasion, hostilities or acts of foreign enemies

• Occupational diseases contracted by an employee

• Interests or penalties imposed on injured employees under any law

• Injuries or accidents incurred under the influence of drugs or alcohol

• Incapacity or death of an employee due to deliberate self-injury

While claiming the workmen's compensation, these documents need to be presented to initiate the process smoothly.

• Duly filled and signed claim form

• Medical treatment bills

• Records of compensation

• Permanent disablement claims (if required)

• Disablement medical certificate

• Memorandum of agreement as per the Workmen Compensation Act between insured employer and injured employee

• Medical certificate for temporary disablement

• Death certificate in events of employee’s demise

• FIR, if any

• Witness statement

• Postpartum report

• Duly filled form Form A given by Employees Compensation Act 1923

-Also Read: Workmen Compensation Claim Settlement Process

Certain conditions regarding the workers' compensation policy need to be followed. The compensation that an employer needs to pay depends on the age of the employer, the nature of the injury and the average monthly wages paid to the employee. However, the minimum and maximum compensation in the event of an employee's death or disability are subject to revisions.

Moreover, when the employee loses their life during employment, the compensation needs to be paid to their dependant. It is the Ministry of Labour and Employment in India that has formed the “Social Security Division”, which is responsible for creating social security policies in India and overseeing their proper implementation across the country.

Choosing a workmen's compensation policy is a feat in itself. Organisations need to consider various considerations before selecting the right insurance provider for their business. A good workmen's compensation policy online provides clear information regarding all the policy wordings and coverage provided. Businesses must also check the policy exclusions to avoid any problems in the future and, most importantly, the reputation of the insurance provider.

TATA AIG SME Insurance fulfils all these necessary criteria for being the best commercial insurance provider. The insurance plans provide third-party liability and lawsuit coverage, help in risk management and provide natural disaster coverage.

Moreover, TATA AIG has a reputation for providing the best customer service for the past twenty years. An organisation needs the trust and credibility of the insurance provider for its workers' compensation policy.

Also Read: Worker’s Compensation Insurance Premium Estimation

What is the rate of WC policy?

The total premium of a standard workmen's compensation policy falls between 0.1% and 1% of total annual wages. It can differ depending on the insurance provider company organisations choose, but the standard remains the same.

What are the benefits of having commercial insurance for business?

Commercial insurance offers several benefits for businesses, such as third-party liability cover, risk management, employee security, lawsuit cover and protection against natural disasters.

Is it necessary for small businesses to have a workmen compensation policy?

Yes, small businesses must have a workmen's compensation policy. Although it is not a compulsion, having a policy saves businesses from liabilities, losses and damages.