The valuations of the Insurance Information Bureau of India (IIB) determine workers’ compensation insurance or Workmen compensation insurance tariffs. In general, the premium amount depends on:
- The average salary you would want the insurer to consider for benefits estimation,
- Covered occupations for employees, and
- The Trade or business of the proposer
Two types of employer liability policies insurers can issue:
Table A Policies: It provides protection for all employees, regardless of their categorize as ‘workmen’ under the Worker Compensation Act.
Table B Policies: Workers not covered by the definition of workmen as per the Act can only receive this.
Therefore, the average cost per thousand varies from Rs.10 to Rs.170, based on the risk of the occupation covered by the policy.
As an employer, in fact, you may also have employees working with varying degrees of risk across your business. The insurer will certainly average out the tariff for all your employees’ risks.
Read More: What is covered under Workmen Compensation Insurance Policy?
Taking into account the costs of running the office and distributing the product, the total premium for a standard policy usually falls between 0.1% to 1% of the total annual wages. To clarify, see the case below for a better understanding.
Case on Workers’ Compensation Insurance Cost
Shrijan Creations makes, sells, design and sew clothes. They have more than 50 workers, including office staff.
Moreover, the organization is buying workmen’s compensation insurance to cover all the staff employed by the firm. Therefore, the insurance will include the 5 drivers who transport goods or ferry workers at times.
The breakdown of workers in Shrijan Creations is as follows:
| No. of Emp. | W.C. Rate | Avg. Wage P.M. | Annual Wage | Max Wage Insured! | Pure Premium | |
| Clerical staff | 6 | 2.45 | 25,000 | 1,800,000 | 864,000 | 2,116 |
| Marketing Staff | 5 | 3.9 | 30,000 | 1,800,000 | 720,000 | 2,808 |
| Machinists | 3 | 12.15 | 18,000 | 648,000 | 432,000 | 5,248 |
| Skilled Workers | 7 | 4.9 | 20,000 | 1,680,000 | 1,008,000 | 4,939 |
| Unskilled Staff | 22 | 4.9 | 15,000 | 3,960,000 | 3,168,000 | 15,523 |
| Drivers | 5 | 2.45 | 15,000 | 900,000 | 720,000 | 1,764 |
| Office boys | 2 | 2.9 | 10,000 | 240,000 | 240,000 | 696 |
| Total | 50 | 11,028,000 | 7,152,000 | 33,096 |
As well as the employer has chosen a medical cover of Rs. 40,000. Therefore, the final payable premium for Shrijan comes out to be:
| Additional Premium for medical cover | 8,274.00 |
| Total Pure Premium | 41,370.00 |
| Office Expenses Loading | 5% |
| Gross Premium | 43438.5 |
| Rate of Interest | 6% |
| Advance Premium Payable | 40,979.72 |
To illustrate, consider this as a sample calculation. For an accurate quote tailored to your organization, click here.
Therefore, the premium of Rs.40,979.72 is only due in the first year. The premium for the next year will depend on any changes in staff numbers, average wages, or claims made in the current year. Hence, the premium comes out to be approximately 0.37% of the total annual wages paid by Shrijan Creations.
Although, Shrijan Creations grow the higher number of employees and workers will reduce their cost of Workmen Compensation Insurance. Therefore, the insurer explained that a good claim history would make the firm eligible for discounts on future premiums.
Read More: When to File Claim Application under Workmen Compensation Insurance?
Additional Premium
Ultimately, insurers may charge an additional premium to renew the policy if there are claims in the last year. Someone has also communicated the same to Shrijan. Since there was a small mishap with one of the vehicles when its tire burst on a busy road.
As a result, the driver, an employee of Shrijan, sustained injuries and spent two weeks in the hospital. Thus, his injuries resulted in a claim on the workmen policy. Therefore, Shrijan’s renewal premium was Rs. 41,082.
