Workmen compensation insurance policy, a commercial insurance policy, provides for an employer’s legal authority to compensate its employees in the event of their death or accident. The insurance, also known as employee compensation insurance or labour insurance, allows an employer to demonstrate his capacity to satisfy the duties set by the Workmen Compensation Act.
Who is a Workman?
Any individual hired for purposes other than the employer’s trade or business (other than a person whose employment is casual and engaged for reasons other than the employer’s trade or business) gets referred to as a workman.
Workmen Compensation Act in India
The Workmen Compensation Act of 1923 is an employee compensation act that requires certain types of companies to compensate their workers or workmen in the event of an accident or injury. Employees and their families are entitled to damages if they are disabled or die due to an accident or injury caused by their job. It also requires employers to compensate employees who get certain occupational diseases due to their job.
The act applies to those who work in plantations, factories, building sites, mines, mechanically propelled vehicles, and other dangerous occupations. It also covers railway employees and those employed in similar capacities.
Workers’ compensation payments are based on their age, the type of injury, and their average monthly salary.
However, for death and disability, the minimum and maximum compensation rates are fixed, subject to regular revisions. If a worker demises on the job, the employer is obligated to compensate the workers’ dependents.
In India, the Ministry of Labour and Employment established the ‘Social Security Division,’ which is in charge of developing and enforcing social security policies for workers. It is also in charge of enforcing the Workers Compensation Act in India. However, the legislation gets administered by the various state governments through Workmen’s Compensation Commissions.
Importance Workmen Compensation/ Labour Insurance
The reasons why all employers should get workers’ compensation or labour insurance coverage are as follows:
- To pay the compensation that the insured policyholder is legally obligated to pay his employees and their families due to the death or bodily injury caused by accidents or diseases contracted at work and during employment.
- To satisfy the insured employer’s liability arising under common law or the laws listed in the Workmen’s Compensation Act of 1923.
- With the approval of the insurance provider, to reimburse the fees or expenditures incurred by the covered employee in defending any additional claims.
What does Workmen Compensation Insurance Policy cover?
The workmen’s compensation or the labour insurance policy provides coverage for the following:
- bodily harm caused by incidents occurring during the course and scope of employment
- bodily harm induced by sickness or aggravated by the working conditions
- death or temporary disability
- Disablement, whether permanent or temporary
- Legal fees and expenditures incurred with the permission of the corporation.
Worker’s compensation insurance add-ons:
- If the contract is simply for labour, the tariff rate gets based on the whole contract amount.
- A labour and materials contract will determine the labour value on merit, up to a maximum of 75% of the contract amount.
Who is dependant on the Workmen Compensation Insurance
The dependant on labour insurance includes:
- a widow or a widowed mother, a minor legitimate son, an unmarried legitimate daughter; if,
- wholly or partially dependent on the earnings of the workman when the death occurred, a son or a daughter who attained the age of 18 years and who is infirm;
- the worker was entirely or partially reliant on his or her wages at the time of death,
- a widower,
- an unmarried illegitimate daughter, a minor illegitimate son, or a legitimate or illegitimate daughter if married and a minor, or a widowed minor,
- a parent other than a widowed mother,
- a widowed daughter-in-law,
- an unmarried sister or a minor brother or a widowed sister if a minor,
- a minor child of a predeceased daughter where none parents of the child are alive, or
- a minor child of a predeceased son,
- a paternal grandparent if no parent of the workman is alive
Exclusions in Workmen Compensation Insurance Policy
Major Exclusions of Workmen Compensation Insurance Policy
Injuries incurred in war and invasion
An employer is not responsible for an employee’s injury, death, or disability caused by war, assaults, invasions, or other events. As a result, employers do not need to settle for connected contingencies in the event of conflicts or assaults.
Injury due to terrorist activity in the office premises
Employers are not responsible for terrorist assaults on business premises. As a result, in terrorist assaults, he is not obligated to reimburse the employee for any losses.
Cost payable to third parties
The remuneration includes fees paid to third parties who are neither employees nor employers. When third-party contractors or labourers sustain an accident, disability, or death, the WCP will not give coverage. It is because these people are not full-time employees of the organisation.
Attempt to suicide or self-harm
The coverage does not cover the employee’s self-inflicted injuries or suicide attempts, and it only covers unintentional injuries and not deliberate ones.
Injury when suffered from intoxication.
Under the WC policy, injuries or disabilities sustained during working hours while under the influence of drugs or liquor are not admissible.
Injuries suffered outside work.
Any form of injury, death, or disability suffered by an employee outside of the scope of their employment is not covered by the insurance. The company is not accountable for any bodily injury that workers sustain outside of work.
Compensation for Injuries payable by the employers under an agreement
Some businesses engage in a contractual arrangement with their employees to pay them for specific injuries that may arise during their job. If the claim and payment are made through contractual agreements, the WP will not settle the claim or make payment. A contractual death benefit is one such benefit.
Required Documents for Workmen Compensation Policy
The essential documents for labour insurance or workmen compensation policy include:
Applicable to all Types of Claims
- Duty filled and signed claim form
- Medical bills
- Compensation records
Claims for Permanent Disability
- Disability-related medical certification
- Memorandum of understanding between the wounded (employers) and the injured labourers following the Workmen’s Compensation Act
Claims for Temporary Disability
- Medical bills
- Disability-related medical certification
Applicable for Fatal Claims
- Death Certificate
- Final investigation report
- A copy of the postmortem report
- The statement was given by the witness if any
- Form A by Workmen’s Compensation Act filled by the insured.
Amount of Compensation
In labour insurance, the amount of compensation depends on certain factors. Like:
- In the event of death: a sum equivalent to 50% of the monthly wage multiplied by the applicable factor as specified in Schedule IV of the Act, or Rs. 80,000/- whichever is greater.
- In the entire permanent disablement, it is 60% or Rs. 90,000/-, whichever is greater, and
- In the scenario of permanent partial disablement, the compensation is proportionate to the disability as determined above.
The Workmen’s Compensation Act of 1923 got enacted to provide labour insurance or compensation to employees injured during their employment due to an accident. This act assures that workers’ rights are protected even if they suffer a disability or die from an accident at work. As a result, employers need to compensate employees who have sustained injuries that have resulted in death or disability while on the job.
FAQs Regarding Labor Insurance
What is the objective of The Workmen Compensation Act?
The Workmen's Compensation Act of 1923 got enacted to compensate workers in the case of an accident.
According to the Act, employers should have duties and obligations that include workers’ well-being following an accident caused by their employment, just as they have reserved the right to make profits. The Act's goal is to ensure that workers enjoy a stable existence after an accident on the job.
What treatment do injured workers receive under labour insurance?
Workers who are injured receive all medically necessary and acceptable treatment. With medical prices skyrocketing, several states have implemented cost-cutting initiatives. These include management standards for certain injuries, including appropriate treatment regimens and diagnostic testing.
When is an employer liable to render compensation to an employee?
- If an employee has suffered personal harm
- If such a personal injury occurred as a consequence of an accident If such an accident occurred as a result of and during employment
- If such an injury resulted in an employee's permanent or partial disablement for more than three days
- If an employee died as a result of such an accident
Who is eligible for the Workmen Compensation Act?
Every employee (including those hired through a contractor but excluding casual employees) employed for the employer's business and sustains an injury in an accident arising out of and in the course of his employment gets entitled to compensation under the Act.