The principle of indemnity enables to restore the worker (insured) to the same financial condition as he was before the loss occurred. To indemnify in workers’ compensation means to make payments to the injured or sick employee or to their family members (if in case the death has occurred) wherein the injury has occurred because of the employment. Similarly, the workers are also entitled to receive the compensation is the case of any occupational diseases or job-related accidents.
The workers’ compensation is divided into two components which are as follows:
Indemnity Cost/Cash Payments for the lost time: Indemnity cost or cash payments are whole sum payments made to the insured because of any job-related accident. This is calculated based on his/her average salary per day. It is calculated for the period until the worker’s condition is stable and is fit to return to the work like before.
In case of the permanent disability or a major loss because of on-the-job injury, the indemnity would be the wholesome amount offered to the worker for the respectable survival of rest of his life. In case of the occurrence of death, the death benefits are made to the family members.
Payments for Medical care: In this case the worker (injured) is supposed to receive the payments in lieu of the medical bills produced up to a limit.
Case for Indemnity in Workers’ Compensation Policy
RWT Enterprises is a mineral water plant and has the headcount of around 70 people in its manufacturing unit. One of the employees Jatin meets an accident while working in the unit. The doctors recommended him to take rest of 15 days along with the medicine. In this case, Jatin will be getting two week’s salary (Indemnity Cost) and the medical costs.
If his average salary for a day is 700 and the medical care costed him INR 2500, then in that case the indemnity will be INR 12,300 (700*14+2500).
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