Most organizations purchase workmen compensation insurance as an annual contract. However, a number of workers can keep changing throughout the year. Thus, any or both of the following two situations may occur at the time of a claim:

  • Number of workers employed by the insured is different from what was provided at the time of contract
  • Average pay of the workers is different from what was provided in the contract

The clause, “all employees covered,” implies that even if the number of employees is more than the registered employees/workers in the insurance plan, the insurer will assume that all the employees are covered under the workmen compensation insurance plan.

Similarly, in the case of different average pay, the workmen compensation insurer will prorate the coverage assuming the employee/worker as covered under the plan.

This proration may increase the employer’s liability at the time of the claim if average pay or number of workers are more than what was stated in the insurance proposal.

Case: 1

From the last five years, K.S Clothing Mill had carved a niche for itself in the industry. As the nature of the business involved working with machines, the company also bought a workmen compensation insurance policy at the time of inception as well. The company which was started with 100 employees reached to 500 in 2015. In the same year, one of its employees, Rajesh Singh, met with an accident while working at the mill.

On a fateful day, Rajesh was working on a machine when his hand gloves caught between the machine, and he suffered major injuries. Though he was rushed to the hospital; doctors had to cut his hand to save his life.

It was only a few months ago when Rajesh had joined the company and being a breadwinner, his family’s future was in the dark.

Read More: How do you get workers comp insurance?

Here, workmen compensation insurance policy purchased by K.S Clothing Mill came to his rescue. Though he had joined the company a few months ago, and the company had not informed the insurer about his joining, he was entitled to get compensation under the policy.

Upon receiving the claim intimation, the workers’ compensation insurer asked for various documents like duly filled claim form, doctor’s prescription, medical bills, etc. Here the insurer offered the following two coverages=

  • Medical Expenses Cover= As Rajesh was taken to the hospital, the insurer settled the medical expenses incurred on his treatment.

 

  • Disability Cover= Due to the accident, Rajesh lost his hand and became disabled. Here, the insurer offered him disability benefits to cover the loss of income.

The insurer also covered transportation expenses incurred on taking Rajesh to the hospital.

Note, though Rajesh joined a few months ago and K.S Clothing Mill had not informed the workmen compensation insurance company about his joining yet, the insurer offered the coverage.

Case: 2

L.K Lightning had a flourishing business of manufacturing lamps. The company had bought a workmen compensation insurance policy to cover legal liability coverage that may arise in case any of its workers get injured or died at the workplace during working hours.

At the time of buying the insurance policy, the company had 100 employees which increased to 350 by 2013. With the rise in some employees, there was an increase in the salary as well.

Read More: Who Should buy Worker’s Compensation Policy?

In 2014, one of its employees, Manoj Rai slipped on the factory floor and broke his left arm. He was taken to the hospital where initial reports suggested fracture. As the accident took place in a factory without Manoj’s fault, the employer became eligible to pay compensation to the injured employee.

Here, it is important to know that the workmen compensation insurance policy was bought much before 2014. During these years, there was a rise in income which was not yet communicated to the insurance company. Still the insurer agreed to settle the claim. The worker’s compensation insurance company paid compensation which was computed on the basis of the current salary of Manoj.

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