Every business needs to plan risk management strategies for long-term growth. The right liability insurance and business insurance policies are crucial to an organisation’s risk management and other internal measures to reduce risk. Businesses need to first understand the types of policies available and how Employers’ Liability Insurance Versus Workers Compensation Policy are relevant to the business. Understanding the insurance policies helps to make the right decision.
Employers’ liability insurance and workers’ compensation policy are the two insurance policies that are used interchangeably. However, there are many differences in the features and benefits of the policy. Hence, it is crucial for businesses opting for these insurance policies to understand the differences. This article highlights the scope of coverage and the differences between employers’ liability insurance and workers’ compensation policy.
Employers’ liability Insurance
Employer liability insurance is a type of business insurance that gives financial protection to the employer against the liabilities that may arise from claims made by employees or third parties. This includes lawsuits arising from the death, bodily injury, and property damage suffered by employees due to work-related accidents. These litigations can be filed as a case of employer negligence.
The employer’s liability insurance covers the cost of defending the lawsuits, claim settlement charges, and third-party claim settlement. The coverage is offered for lawsuits arising from third-party over-action, consequential injury, etc.
For example, let us say an employee dies in a workplace accident. The family is paid worker compensation as per law. Now, if the immediate family member suffers a stroke due to stress caused by death. In this scenario, the family can file a case against the employer for the consequential injury.
Workers Compensation Insurance
Worker compensation insurance is also a type of business insurance. This gives financial assistance in case a worker suffers bodily injury, death, property damage, or illness while performing a job due to a workplace accident. The workers’ insurance policy provides compensation for death, disability, income loss, medical cost, etc. as per the provisions of the Workmen Compensation Act, of 1923.
Workman compensation is a no-fault insurance policy that provides a cushion for employees and employers. For example, a worker suffers an injury while operating machinery at work. Workers’ compensation policy provides financial assistance to the employer to meet the legal requirements and compensate for the employee’s treatment.
Difference Between Employers Liability Insurance and Workers Compensation Insurance
Though the main coverage offered by these insurance policies looks quite similar, there are a few differences. Let us understand the major differences between employers’ liability insurance and workmen’s compensation policies based on various parameters:
| Parameter | Employers’ Liability Insurance | Workers Compensation Insurance |
| Requirement | Though employers’ liability insurance is not mandatory by law, it is important for employers to have extensive financial protection against liabilities arising from employee or third-party claims. | Workers’ compensation policy is a compulsory requirement by law. |
| Scope of cover | Employee liability policy online offers broader coverage which can be availed on top of workers’ compensation policy. This policy covers a wide range of liabilities including legal costs, proceedings, and settlement costs. | Workman compensation provides coverage as per the provisions of the Workmen Compensation Act. It compensates for death, disability, injury, and illnesses caused to employees due to workplace accidents. |
| Basis of claim | The claim can arise from any third party or employee on the basis of the employer’s negligence. However, the compensation is paid as per the court-order settlement. | The claim in this policy is on a ‘no fault’ basis. There is no need to prove the negligence of the employer. However, the amount of compensation is limited as per the defined provisions in the Workmen Compensation Act. |
Conclusion
There are similarities as well as differences in both employers’ liability insurance and workers’ compensation policy. Understanding these insurance policies can help businesses to avail the right type of coverage to protect the well-being of their employees. Having the right business insurance policy also helps businesses in reputation management and restores the trust of customers.
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.
