Who Should Buy Workers Compensation Policy?

Any company or employer, including contractors, who hires workers as defined in the Workmen Compensation Act, of 1923, can purchase a workmen compensation insurance policy. This insurance cover provides legal liability coverage and also helps in easing the financial burden on employees and employers.

Employers can meet the medical expenses of their employees in case they suffer injuries at the workplace. It also covers the legal cost when employees file lawsuits against employers for injury during their work. Since it also covers legal expenses and compensations ordered by labor courts, it provides significant financial relief to organizations.

Key Takeaways

• Universal Responsibility: The obligation to pay compensation lies with the employer regardless of whether the worker is part-time, full-time, or contractual.

• Beyond Physical Health: The policy is comprehensive, covering medical expenses for injuries or permanent damage to both the worker’s body and mind occurring during employment.

• The “Menial Job” Focus: A primary advantage of this policy is its inclusion of workers typically excluded from group health policies, such as drivers, guards, and housekeeping staff.

• Statutory Relief: Because labor courts can order significant compensation, having this insurance provides “significant financial relief” by covering both the settlement amount and the legal costs of the lawsuit.

• Attracting Talent: For brands like ShineGram, providing WC insurance is a competitive advantage; it helps in attracting dedicated workers and reduces the risk of labor-management conflicts.

• Global Reach: Indian firms hiring workers for menial jobs in foreign countries can also utilize this policy to manage their international legal liabilities.

Industries/firms that can take Workers Compensation Policy

The following firms or industries can take benefit of workmen compensation by buying it.

• Firms, corporates or associations, or persons employing workers on contract
• Any Indian firm hiring a worker in a foreign country as a driver, labourer, or any other menial jobs
• Shipping ports, docks, companies, and ship owners
• Construction firms, contractors, and builders for workers involved in repairing, constructing and maintenance of the building
• Civil engineering firms, contractors, and firms
• Nuclear mining, reactor, and other handling companies or firms
• Any firm, establishment, or corporate employing watchmen
• Farming companies that employ workers to farm, harvest, and process farm produce

These organizations, along with any other firm or business entity, must ensure a safe work environment for workers/employees employed on a part-time or contract basis. However, the cost of treatment for an injured or infected worker lies with the employer. The employer must cover the expenses for treating injuries or permanent damage to the worker’s body or mind that occur during employment.

Therefore, compensation is payable to the worker by the employer. The Workmen Compensation, Act 1923 defines this financial liability.

See: How to Calculate settlement in Worker’s Compensation Injury?

Hence, any employer -whether individual or firm is liable to provide compensation for its employee’s medical treatment. Workmen Compensation Act also covers workers engaged in menial tasks, including electrical maintenance. Anyone, whether an individual, company, or corporation, who employs such workers should purchase Workers’ Compensation insurance to promptly address liabilities.

Case on Workmen Insurance capability

Willman & Colt Ltd. is a firm dealing in defence equipment and explosives. It manufactures gun barrels, enforced steel wheels, mines, bullets, and gun shells. It employs approximately 150 employees and workers throughout the country.

Around 90 workers, out of its total workforce, engage in loading and unloading tasks. Among these, many engage in the transfer of explosives and handling semi-finished and finished products of the company. W&C Ltd. is responsible for compensating these workers if they sustain injuries while operating.

However, because of the high risk of damage, health and critical cover are not available to these workers.

See: What is indemnity in Workers Compensation Insurance?

Colt Ltd. must buy a workmen compensation policy to offer its workers sufficient financial backup in adverse circumstances. The policy also covers the drivers and guards employed by the firm. Both these workers are contractual and not entitled to the group health and term life policies.

Summary Table: Industry Applicability & Coverage Scope

Case 2

ShineGram is a Shoe Polish brand, which manufactures and markets a diverse range of products for shoe and leather care. The company employs more than 30 contractual workers in various stages of the manufacturing process. Most workers do packing and loading as well as unloading of the goods.

The company must provide compensation for injuries or illnesses suffered by a worker during work and at the workplace.

 So, ShineGram must buy a workmen compensation insurance policy to cover its liability towards these workers.

The policy also covers drivers and other menial workers. The insurance coverage also includes other employees serving the company in different roles, such as electricians and housekeeping staff.

This insurance gives factories an advantage in attracting dedicated workers and reduces the risk of conflicts between workers and management.

Frequently Asked Questions (FAQs)

1. Does the policy cover office staff like the HR department or accountants?

A) While the Act specifically focuses on “workmen” in menial or hazardous roles (like electricians and laborers), many employers choose to cover their entire staff to mitigate legal risks. However, its primary purpose is to protect those in roles where injuries are more frequent.

2. Is a company liable if a contract worker gets injured while working on-site?

A) Yes. The Act explicitly includes contractors and those employing workers on contract. The responsibility to cover the cost of treatment and compensation lies with the employer who is utilizing the worker’s services at the time of the accident.

3. What kind of “mental damage” does the insurance cover?

A) The policy covers permanent damage to the worker’s mind if it is caused by a workplace accident or traumatic event occurring during the scope of employment. This recognizes that workplace hazards can have psychological impacts as well as physical ones.

4. Why is this policy necessary if I already have Group Health Insurance?

A) Standard health policies often exclude high-risk activities (like handling explosives) or specific menial roles. Furthermore, health insurance doesn’t cover legal defense costs or statutory payouts ordered by a labor court, whereas WC insurance does.

5. How does this policy help with Indian workers hired for jobs abroad?

A) If an Indian firm hires a driver or laborer to work in a foreign country, that firm is still liable under Indian law for their welfare. A Workmen’s Compensation policy can be structured to cover these liabilities for Indian workers employed overseas.

About The Author

Rahul Kumar 

MBA Finance

With a wealth of experience in the insurance industry, Rahul is a seasoned writer specializing in articles related to workmen compensation policies (WC policies) for SecureNow. With 12 years of experience in the field, he has acquired in-depth knowledge and expertise in workmen compensation insurance, understanding its complexities and nuances. Their insightful articles provide valuable insights into the importance of WC policies for businesses and employees alike, offering practical advice and guidance on navigating the intricacies of insurance coverage. Trust him to deliver informative and engaging content, backed by years of experience and a passion for educating readers about insurance-related topics.