Workmen Compensation

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General insurance policies work on the principle of indemnity. The insurance company has to compensate the loss suffered by the policyholder as per the principle of indemnity. The bottom line of the principle of indemnity is to put the policyholder in the same financial position that he was in prior to the loss.

A workmen’s compensation insurance policy covers the legal liability faced by the employer if the employee suffers an injury or dies during employment. If an employee suffers death, disablement or injuries at the workplace it is the employer’s duty to compensate for the employee’s financial loss. Hence, a workmen’s compensation policy is an important policy to have for an employer. It provides employers with adequate financial and legal liability coverage. The insurance company handles any accident claims raised during the course of employment.

The claims made when an employee is killed or injured are called as claims of indemnity.

Under the policy, there are different compensation benefits for different types of claims as follows:

  1. In case of physical injuries 

If an employee suffers physical injuries which render him/ her unable to work for some time, the WC policy would pay for the loss of income. The wages/salary of the worker on a per-day basis would be paid for the number of days the employee is unable to work. It ensures lost wages to an employee while he recovers.

  1. In case of permanent disablement

Employees who are unable to return to work for injuries causing permanent disablement are provided with a lump sum amount. This benefit is as per the limits specified under the workmen’s compensation policy. However, as human life cannot be correctly estimated so the principle of indemnity is not applied in this case. Hence, employees are liable to receive a lump sum amount to take care of themselves after their unemployment.

  1. In case of death

The principle of indemnity does not apply in death cases too. It is not possible to calculate the value of human life. So,  a sum insured is payable under the workmen’s compensation insurance policy when the employee dies. The wages of the employee determine the insured amount. The employee’s family is provided with a lump sum amount upon the employee’s death. This amount should be adequate to provide proper financial support to the employee’s family, even in the absence of the sole breadwinner.

  1. In case of medical claims

A worker compensation policy coverage can also cover the medical costs of a hospitalized worker following an injury.  Claims for medical bills and hospitalisation are the claims of indemnity. The policy would pay the actual medical costs incurred on the treatment of the employee.

  1. In case of a lawsuit

A workmen’s compensation policy can provide coverage for legal defence costs with the consent of the insurance company. The principle of indemnity is applicable in this case too. The policy pays the actual costs incurred in defending the organisation in litigation.

Understanding the claim concepts helps organisations know how the claim under a workmen’s compensation policy is paid. So, the concept of the claim of indemnity should be clearly understood before filing a claim in a workmen’s compensation insurance policy.