The indemnity clause entitles workers to get compensation for lost wages that they are otherwise capable of earning while recovering from a work-related accidental injury/illness. In workers’ compensation insurance, ‘to indemnify’ means to make payments to the injured or sick employee or to their family members during their employment course, and as specified by the worker courts. Similarly, the workers are also entitled to receive compensation in case they suffer from any occupational diseases or job-related accidents. Let’s get to know what is indemnity in Workers’ Compensation Insurance.
The Workers Compensation Act of 1963 was passed to provide financial protection for workers who are injured or disabled on the job. The Act was a response to the growing recognition of the need to protect workers and their families from the financial hardships that can result from workplace injuries. Prior to the Act, injured workers often had to rely on charity or personal savings to make ends meet, leading to significant economic hardship. The Act mandated that employers carry insurance to cover the costs of workplace injuries, and established a system for workers to file claims and receive compensation for their injuries. Overall, the Workers Compensation Act of 1963 represented a major step forward in protecting the rights and well-being of workers.
Two components of Workers’ compensation
Indemnity Cost/Cash Payments for the lost time:
Indemnity costs or cash payments, through worker’s comp benefits, will compensate workers for lost wages because of his/her inability to work for any job-related accident. The average salary per day of the worker determines the indemnity amount. It is calculated for the duration of the disability and paid until the worker’s condition becomes stable and he/she is fit to return to the work like before.
In case of a permanent disability or a major loss because of an on-the-job injury, the indemnity would be an amount sufficient enough for a respectable survival for the rest of his life. Family members of workers would get compensation benefits in case of the occurrence of death of the worker.
- Payments for Medical Expenses:
An injured worker undergoing medical treatment will receive payments in lieu of the medical bills produced up to a limit. In such cases, workmen’s compensation insurance will pay for all his medical expenses till the time of his recovery.
Additional Read: How to Calculate a Settlement in a Workman’s Compensation Injury?
Case on Indemnity in Workers Compensation Insurance
RWT Enterprises is a mineral water processing plant and has a headcount of around 70 in its manufacturing unit. RWT had bought workmen’s compensation insurance and had covered all the workers. One of the employees, Jatin, met with an accident while working in the unit. The doctors recommended he take rest for 15 days along with a course of medicines. Jatin is liable to get two weeks’ salary as an indemnity cost. Besides, he will also receive medical costs during the period of his recovery.
If his average salary for a day is Rs. 700 and the medical care costs him Rs 2500, the indemnity amount will be Rs 12,300 (700*14+2500).
The Workers Compensation Act of 1963 provides indemnification to employees who are injured or disabled as a result of their work. This includes full-time, part-time, and seasonal employees, as well as temporary workers, apprentices, and trainees. The Act also covers employees who are injured while traveling to or from work, or who develop occupational illnesses as a result of their work. However, the Act does not cover independent contractors or volunteers.
It is important to have an expert and experienced insurance intermediary to help you understand indemnity clauses. Get more clarity on how your state handles indemnity benefits, and find the best coverage possible.