Employees working in high-risk sectors, such as construction and mining, are exposed to various risks that can lead to workplace accidents. These accidents can bring additional financial burden for employers. Hence, to minimise such incidents, employers ensure workplace safety by investing in workers’ compensation insurance.
Workers’ compensation, also known as labour insurance, safeguards both employers and employees from financial and legal liabilities. But often, people wonder about the purpose of workers’ compensation insurance. This blog will help you understand the purpose of worker compensation and how it can help businesses.
What is Workers’ Compensation Insurance?
Workers’ compensation insurance is a type of coverage designed to offer financial protection to employees in the event of workplace-related accidents or injuries.
The plan helps cover medical expenses, rehabilitation costs, lost wages, and more, ensuring that employees do not face financial hardships. It also helps employers adhere to legal requirements.
By offering a well-defined compensation and benefits system, employers can reduce workplace litigation cases and offer a more secure workplace to employees.
Purpose of Workers’ Compensation Insurance
Workers’ compensation insurance is governed under the Workmen’s Compensation Act of 1923. Its primary aim is to protect the rights and financial interests of workers who might face injury, disability, or death due to work-related activities.
Here are some of the key purposes of the workers’ compensation or labour insurance plan.
1. Financial Protection For Workers
One of the core purposes of workers’ compensation insurance is to offer financial protection to workers and their dependents during unfortunate incidents.
Under the Workmen’s Compensation Act, workers who sustain injuries due to work-related tasks receive fair compensation.
The financial protection offered helps workers maintain a basic standard of living and recover from the economic impact of workplace accidents.
2. Encourages Workplace Safety Measures
Another significant purpose of workers’ compensation insurance is that it incentivises employers to create safer work environments.
Since the employer bears the financial responsibility for compensating injured workers under the insurance plan, there is a strong motivation to invest in workplace safety protocols, training, protective equipment, and proper infrastructure.
Employers are encouraged to assess potential risks and implement measures to prevent accidents.
3. Prompt and Fair Compensation
Workers’ compensation or labour insurance follows a no-fault compensation system. This means that the injured employee is entitled to compensation regardless of whether they were at fault in the accident or whether the employer was at fault.
The rationale for this system is to avoid prolonged and costly litigation and provide injured workers with financial assistance. This ensures quick, fair, and dispute-free compensation in cases where the injured worker is unable to perform their job duties.
4. Enhances Business Reputation
Investing in workers’ compensation insurance is also critical for improving business reputation. Business owners who carry workers’ compensation insurance make good business sense by creating good relations with employees.
Moreover, companies that invest in the welfare of their employees are more often perceived as responsible and socially conscious. This raises the company’s credibility among customers, investors, partners, and the public.
What Coverage Worker or Labour Insurance Offers?
The workers’ compensation insurance offers a wide range of coverage to workers in the event of workplace-related injuries or accidents, such as:
1. Medical Benefits
The insurance plan will help cover the medical expenses of workers who fall sick or get injured due to work-related conditions. The medical benefits include hospitalisation expenses, diagnostic tests, surgeries, and more.
By purchasing workers’ compensation coverage from legitimate insurance providers like TATA AIG, you can be assured of reliable benefits and support when it matters most
2. Disability Benefits
Workers’ compensation insurance also helps in offering disability benefits to employees. Sometimes, due to worksite accidents, workers suffer injuries that lead to permanent and total disability.
This makes the employee unable to perform the job to full efficiency. In such a situation, based on the injury sustained and worker efficiency, compensation is granted to employees.
3. Death Benefits
Another coverage offered under the workers’ compensation insurance is death benefits to dependent members of workers in case the workers die in an accident.
These death benefits typically include a lump-sum compensation to the dependents, such as the spouse, children, etc.
The compensation amount is generally calculated based on the worker’s wages and the nature of dependency of the family members.
Conclusion
Both employees and employers should understand the purpose of worker compensation. This is good for knowing their rights, benefits, duties, and much more. Workers’ compensation insurance enables employers to mitigate financial and legal liabilities. Hence, employers must invest in workers’ compensation insurance.
