Workers' Comp Death Benefits vs. Life Insurance: What Each Pays

Workers' comp death benefits pay only when a worker dies from a job-related injury or illness, and the amount is set by state law, usually as a share of the worker's wages paid to eligible dependents plus a capped burial benefit. Life insurance pays a lump sum you choose, to anyone you name, for most causes of death on or off the job. They do different jobs, and many working families need both.

Below, we explain what workers' comp death benefits pay in three large states, what they leave out, and how to size life insurance around them.

What are workers' comp death benefits?

Workers' comp death benefits are payments to a worker's survivors when a work injury or work illness causes the death. They're part of each state's workers' compensation system, so the rules change when you cross a state line.

The Texas Division of Workers' Compensation describes them as benefits that "help families replace some of the money lost when an employee dies because of a work-related injury or illness." Benefits usually include:

• Weekly income payments to a surviving spouse, children, or other dependents defined by law
• Burial or funeral expenses, up to a state cap

Federal employees, longshore workers, and coal miners have separate federal programs. For everyone else, the U.S. Department of Labor keeps a directory of each state's workers' compensation agency.

How much do workers' comp death benefits pay?

It depends on your state, your wages, and who survives you. Here's how three large states handle it, based on their own agency pages and statutes. Amounts can change, so check the linked page for current figures and weekly limits.

Sources: Texas DWC, California DWC, New York WCB.

Texas

In Texas, death benefits equal 75% of the employee's average weekly wage, with maximum and minimum limits. If there are dependent children, the Texas DWC says the children get half and the spouse gets the other half. The agency cites Texas Labor Code sections 408.181 through 408.187. If no spouse, child, or other dependent qualifies, non-dependent parents may get benefits limited to 104 weeks.

California

California's Division of Workers' Compensation sets the total by the number of total and partial dependents. For partial dependents only, the benefit is eight times annual support, capped at $250,000. With one or more totally dependent minors, benefits continue past the total until the youngest turns 18, and disabled minors receive benefits for life.

New York

New York's Workers' Compensation Board pays two-thirds of the worker's average weekly wage from the 52 weeks before the accident. The weekly amount can't exceed the maximum for the date of injury, regardless of the number of dependents. Under Workers' Compensation Law § 16, a spouse with children receives 36 2/3% and the children 30%. The law also reduces the spouse's benefit if the spouse receives Social Security survivors benefits, based on a formula in the statute. If there is no spouse or dependent, surviving parents or the estate may be entitled to $50,000.

What doesn't workers' comp cover?

A lot, which is why it isn't a life insurance plan. Workers' comp is built to cover work deaths, not to replace your income no matter what happens.

• Deaths that aren't work-related. A heart attack at home, a weekend car crash, or a cancer unrelated to work is outside the system.
• Employers without coverage. In Texas, the Department of Insurance says private employers can choose to carry workers' comp, "but it is not required in most cases."
• Self-employed workers and many contractors. Workers' comp generally covers employees. If you run your own crew or work on a 1099, you may have no coverage at all.
• Your choice of beneficiary. State law decides who qualifies. You can't leave the benefit to a sibling or a friend who isn't a legal dependent.
• Payments that stop. Benefits can end when a spouse remarries or a child ages out, and they're paid over time rather than as one lump sum.

How is life insurance different from workers' comp?

Life insurance is a contract you control. You pick the amount, the length, and the beneficiaries, and it generally pays whether you die at work or at home.

What could this look like for a working family?

Here's a hypothetical to show the gap. Picture a hypothetical Texas roofer earning an average of $1,000 a week, married with two kids, whose employer carries workers' comp.

• If he dies from a fall on the job: Under the Texas formula, benefits would be 75% of $1,000, or $750 a week before state limits, split between his spouse and children, plus up to $10,000 for burial.
• If he dies in a crash on a Saturday fishing trip: Workers' comp pays nothing, because the death isn't work-related.
• If his employer is a non-subscriber: Workers' comp may not apply even for a job-site death.

In the second and third cases, a life insurance policy may be the only money his family receives. That's why it helps to plan as if workers' comp might not pay at all.

How much life insurance should you have if you have workers' comp?

Size your life insurance without counting on workers' comp. It pays only in one narrow situation, so treat any benefit it might pay as a bonus rather than a base.

The NAIC suggests starting with a few questions: how much of the family income you provide, how your survivors would get by, and how they'd pay final expenses and debts. Then look at what you already have:

1. Add up income your family would need and for how many years.
2. Add debts such as your mortgage, vehicle, and credit cards.
3. Add future costs like your kids' schooling and final expenses. Our guide to how much a funeral costs can help with that number.
4. Subtract savings and any life insurance you own.
5. Be careful counting group coverage from your job or union, since it usually ends when you leave. Our article on union life insurance benefits explains why.

Our life insurance calculator can walk you through the math.

What should your family do after a work-related death?

Act quickly, because the deadlines are real. The steps below apply in most states, but check your state agency for its rules.

1. Tell the employer and its insurance carrier about the death as soon as possible.
2. File the state death benefit claim. Texas uses DWC Form-042, filed within one year. New York uses Form C-62, filed within two years.
3. Keep every funeral bill and receipt, since burial benefits are usually reimbursed up to a cap.
4. File any life insurance claims separately. A life policy pays under its own terms. If you're not sure a policy exists, our guide on how to find a lost life insurance policy explains the NAIC's policy locator.
5. Ask for help if a claim is denied. State agencies have dispute processes. In Texas, for example, anyone involved in a denied burial claim can request a benefit review conference with DWC.

For more on protecting a family when you work a physical job, see our guide to life insurance for blue-collar workers or browse the blue-collar workers hub.