If you are a business owner you have to ensure that your company is adequately protected. This means opting for the right insurance policy is a crucial business decision. Employers liability insurance and workers compensation insurance are often used interchangeably, but there are a few differences between the insurances. The article below highlights the difference between employers liability and workers compensation insurance.
Workers compensation insurance is commonly known as employees compensation insurance or workmen insurance. It is a commercial insurance policy. It mainly covers the legal liability towards its employer by providing compensation in case of an accident that causes injury or kills the employee during employment. It also covers diseases caused or aggravated due to employment conditions.
For example, if one of your employees/workers fractured his hand in the factory while operating machinery. Then, in this case, the workers compensation insurance can help pay for the treatment as a means of compensation.
Employers liability insurance is also a type of commercial insurance that provides financial protection to the employers if an employee sues the employer for a work-related injury. Additionally, this insurance also covers the legal cost and third-party claims.
In continuation with the above example, if the employee/ worker feels that workers compensation didn't cover all the expenses, then the worker can file a lawsuit against the employer for poor machinery. The legal cost incurred by the employer (whether or not the employer is liable) can be covered under employers liability insurance.
Since both these policies are designed on similar lines, it is pretty natural to get confused between them. We have already stated the basic idea of both the policies with an example for better understanding. Further, we shall look at the differences between them.Â
| Workers Compensation Insurance | Employers Liability Insurance | |
| What is it? | Legal liability by the employer to pay compensation in case of injury caused to the employee | Financial protection to the employer to pay for compensation and legal expenses |
| Coverage | Injury caused due to a disease Injury getting worse due to employment conditions Injury caused due to accident at the workplace Partial and permanent disablement Death or temporary disablement |
Third party claims: For example, if the employee files a case against the vendor of the machinery and the vendor sues the employer for non-maintenance. Loss of consortium: A dependent of the injured/deceased employee can sue the employer for negligence. Dual capacity: If a product manufactured by the employer injures the employee, then he can sue the employer even as a manufacturer of the product. Consequential bodily injury: If the employee claims that the injury is caused due to high level of stress at work. False claims |
| Scope | Narrow | Broader |
| Mandatory | Yes | No |
| Amount payable | As per the wages system | No limit |
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Conclusion
There is a major similarity between workers compensation insurance and employers liability insurance. Both cover workplace-related injuries or illness, but in different aspects. But, when it comes to practice, they are highly complementary. It is to be noted that these policies work in tandem to protect businesses from expenses related to employee injuries.
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