One of the key components of workers' compensation insurance is the concept of “death benefits.” If you’ve lost a family member due to a work-related injury or disease, or you're just trying to understand the subject, you should know that you may be entitled to receive death benefits through your state’s workers’ compensation system and/or the deceased's employer’s insurance coverage.
While this article is meant to be educational in nature, bear in mind that there are many aspects of death benefits that require the assistance of a qualified independent insurance agent. If you’re looking to determine whether you’re entitled to death benefits in your particular state, qualify for them in the future, or want to boost your coverage for your family, an independent insurance agent can provide unbiased guidance and answer any questions you may have.
What are Death Benefits?
Death benefits are funds used to financially compensate family members after an individual passes away. Often included in many common insurance policies, death benefits are included as a part of workers’ compensation policy, designed to offset the financial burden of income, funeral arrangements, and other expenses that dependents may experience.
In all states, workers’ compensation pays at least a portion of funeral expenses for employees who died as a result of their work injuries or who came down with a terminal illness due to their role. This amount can be anywhere from a few thousand dollars to more than ten thousand dollars, depending on maximum limits.
In the event that a worker dies while receiving medical treatment, workers’ comp also covers the treatment received before the individual passed away. Generally, most families should not have to pay remaining medical bills, but the employee’s insurance company and/or the state workers’ compensation agency may review those bills to ensure that the treatment was necessary and related to the work injury/illness.
Who Receives Death Benefits?
In most cases, those entitled to death benefits are family members related by blood or marriage to the deceased employee including spouses, children, and dependent relatives who relied on the deceased employee for their living expenses.
Generally speaking, children under the age of 18 are almost always considered dependents. The same goes for older children who have certain mental or physical disabilities who are unable to earn a living. And children between the ages of 18 and 25 may also qualify to receive death benefits if they’re enrolled in certain educational or vocational programs.
However, the exact eligibility requirements of these workers' comp-related death benefits may vary from state to state. Different rules apply for deciding who qualifies as a dependent, depending on their relationship to the deceased employee and each state’s law. For instance, Ohio allows some benefits for relatives who were only partially dependent on the deceased employee. In contrast, California divides dependents into “total dependents” and “partial dependents,” with the latter being decided by court rulings.
Furthermore, there is a time limit as to when you can file for death benefits in most states. This window varies per state, but most allow for two years before dependents are ineligible to receive death benefits that they may be entitled to.
To get state-specific answers to these questions, independent insurance agents can provide you with details that are specific to your situation.
What Do Death Benefits Cover?
Death benefits via workers’ compensation insurance are given out if it is determined that an individual died from work-related causes. For on-the-job injuries, like a traumatic fall leading to death, this is clear-cut.
However, if the work injury or occupational disease contributed to or accelerated the death, the individual’s loved ones may have to prove that their employment was the cause. Of course, this leads to a gray area for eligibility. Despite this, if your loved one had other medical conditions unrelated to work, you still may be eligible for death benefits. As an example, beneficiaries may be able to claim death benefits if your workplace accident aggravated their spouse's preexisting heart condition which ultimately led to their death.
Considering that some injuries and illnesses may adversely affect workers months or years later, state law plays a substantial role in deciding if these causes lead to their death and thus qualifying beneficiaries for death benefits. For example, Virginia doesn’t allow benefits for deaths that happened too many years after the original accident.
Death benefits are also available when employees eventually die from illnesses they developed as a result of conditions in their work environment, such as exposure to dangerous chemicals. For first-responders affected by hazardous materials on 9/11, as an example, New York offers “alternative death benefits” and “post-retirement death benefits” that are specifically designed to address deaths determined to result from exposure.
For these reasons and more, it can be confusing to determine whether you and other dependents are eligible for death benefits. An independent insurance agent can help you do the necessary research to see if you and your family qualify for death benefits in your state, answering any questions that you may have.
How Long Do Death Benefits Last?
There are usually two different ways death benefits are paid out: installments and lump-sum payments.
When death benefits are paid in regular installments, the amount of those payments is based on a percentage of what the employee used to earn before the injury. The percentage varies by state, but the typical weekly payment is two-thirds of the deceased employee’s average weekly wage, with minimum and maximum amounts.
There are time limits on how long those regularly occurring payments continue when death benefits are paid in installments. In many states, surviving spouses receive benefits until their own death or if they remarry. Children can typically receive death benefits until they turn 18, or in some cases, until they complete certain types of post-secondary education or vocational training.
In other states, death benefits will stop regardless of the children’s age or the surviving spouse's remarriage after a certain number of weeks or a certain maximum dollar amount has been reached. For example, several states like Alabama only offers a time period of 500 weeks for a maximum time period. On the other hand, Illinois offers death benefits for a maximum of 25 years or $500,000 (whichever is greater).
Instead of installment payments, some states pay a one-time lump sum that factors out to two-thirds of the deceased employee’s wages for a certain period of time, such as two years. For a worker who made $50,000 per year, the resulting lump sum payment would be $66,000 for a two-year period.
Lump-sum payments are generally subject to a minimum or maximum amount. Negotiation is possible for states that pay installment benefits, so it is important to speak with an attorney who specializes in these types of cases.
More Payment Factors
- In some states, the total amount of death benefits remains the same regardless of how many dependents there are. This means, for example, that the same total benefit amount may be distributed among the surviving spouse and several dependent children.
- Alternatively, other states provide a benefit amount that increases as the number of dependents increases.
- For those who are also receiving survivors’ benefits through Social Security, there may be an offset that reduces your workers’ comp death benefits.
Because every situation is different, an independent insurance agent can help you see if you qualify for death benefits in your state.
How Much Does It Cost?
For workers, death benefits are usually funded through state taxes to a state’s workers’ compensation fund through their employer. When death benefits are distributed, they are redistributed from this fund and/or through insurance policies of the employer. In this way, the state works as a type of insurance company for workers.
Employers have a few options when it comes to workers’ compensation insurance. Considering that workers’ comp insurance is mandatory for most employers and may be in violation of your state’s law, having a workers’ comp insurance policy may only be optional if:
- Hire two or more W-2 employees
- Operate your business as a sole proprietor
- Only employ 1099 independent contractors
- And other state-specific exclusions
That being said, employers looking to have a comprehensive workers' compensation policy will find it relatively cheap. According to the National Academy of Social Insurance, employer costs for workers’ comp insurance per $100 of covered payroll range from a low of $0.57 in Texas to $2.32 in Alaska. This means that if your annual payroll is $100,000, workers' comp insurance is only $570 per year in Texas, $2,320 per year in Alaska.
Of course, these rates can be higher for a number of factors, such as:
- Your industry
- The type of work performed by your employees
- The state(s) where your employees work
- Annual payroll
- Your claims history
Speak with an independent insurance agent to learn more about the cost of workers’ comp insurance in your state today.
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