Workmen compensation insurance tariffs, in the first place, are determined based on the valuations of the Insurance Information Bureau of India (IIB). In general, the premium amount depends on:
- The average salary you would want the insurer to consider for benefits estimation,
- The occupations of employees to be covered, and
- The Trade or business of the proposer
Two types of employer liability policies insurers can issue:
Table A Policies: Can be issued to cover all employees, whether falling under the definition of ‘workmen’ of Worker Compensation Act or not.
Table B Policies: This can be issued only to workers who do not fall into the definition of workmen as per the Act.
Therefore, the average premium rate per thousand varies from Rs. 10 to Rs. 170 per thousand sum-insured under the policy depending in fact, on the risk of the occupation.
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.
After loading for office and distribution expenses, the overall premium for a standard policy ranges between 0.1% to 1% of total annual wages paid. To clarify, see the case below for a better understanding.
Case on Workers’ Compensation Insurance Cost
Shrijan Creations is a clothing manufacturing (designing and stitching) and export house and employs more than 50 workers and 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|
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%|
|Rate of Interest||6%|
|Advance Premium Payable||40,979.72|
To demonstrate, this is a sample calculation and should only be used as a reference, so click here to get a real quote for your organization.
So, the premium of Rs. 40,979.72 is only payable in the first year, next year’s premium will be basically, decided based on any change in staff numbers, average wages, or claims made within this 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.
Ultimately, insurers may charge an additional premium to renew the policy if there are claims in the last year.
Shrijan has also been communicated the same. 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 got injured and was hospitalized for two weeks. Thus, his injuries resulted in a claim on the workmen policy. Therefore, Shrijan’s renewal premium was Rs. 41,082.