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Workers’ compensation vs. life insurance

These coverage options serve different functions but have one benefit in common.

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Workers’ compensation is a benefit you may not think much about until you get hurt or sick on the job. But if your death is related to your job, your worker’s comp benefits can supplement your life insurance coverage to help offset your end-of-life expenses.

Features of workers’ compensation vs. life insurance

Life insurance and workers’ compensation serve different functions but have some vital features in common.

Workers’ compensation Life insurance
Definition Insurance, typically required by the state, to compensate you for a work-related illness or injury. Insurance that pays out a death benefit if you die during your term.
Who chooses the policy? Your employer either purchases this coverage from the state or from a private insurer. You purchase this coverage either as part of a group policy through your employer or as private insurance directly from the company.
Who pays the monthly premiums? Your employer. Only two states don’t require employers to provide this coverage: Texas and New Jersey. Your employer may pay part or all of group policy premiums, but you pay individual policy premiums.
Who gets the death benefit? Your beneficiaries Your beneficiaries
Are funeral expenses covered? Yes. Usually your benefits include money to cover funeral expenses. Yes, but not always specifically. You can buy a form of life insurance just for end-of-life expenses, but standard life insurance doesn’t dictate how the death benefit is spent.
What other coverage is offered? Coverage for medical expenses, lost wages, long-term care and other compensation related to work-related illness or injury. If you buy term insurance, only the death benefit. If you buy a permanent policy, your policy also accrues a cash value.
Can I customize my coverage? No. The details of your policy are typically dictated by the state. Yes. You can choose the type and amount of your coverage, then further customize with policy riders. Even group policies usually offer some customization options.
How much coverage is included? The amount of the death benefit is determined by the state and is usually related to the wages of the deceased, for example, two-times the amount the deceased made in the previous year. The amount of your coverage is determined by what you qualify for and choose to purchase.

What is workers’ compensation?

Workers’ compensation provides benefits for employees who experience a work-related illness or injury. Benefits can include medical expenses, lost wages and even death and funeral benefits.

How does workers’ compensation work?

A workers’ compensation policy is either purchased from the state or from a private insurance company, and the premiums are typically paid for by the company. If you’re injured or become ill because of your work, file a claim with your HR to start the process.

If a work-related incident causes your death, your beneficiaries can file a claim to help cover funeral expenses and get the state-mandated survivor benefits to help with financial needs. These policies also provide some protection for the employer, because the employee can’t sue for injuries while receiving workers’ compensation.

What is life insurance?

Life insurance is a policy that pays a lump-sum death benefit to your beneficiaries after you die.

How does life insurance work?

You pay a premium to maintain your policy and when you die, your insurer pays a lump-sum death benefit to your beneficiaries to help with bills and expenses. If you’re willing to pay more in premiums, you can buy a permanent life insurance policy that accumulates cash value and provides lifelong coverage.

How do I compare workers’ compensation and life insurance?

What workers’ compensation and life insurance have in common is that both pay out a death benefit. Life insurance provides coverage no matter what causes your death. And if your death is related to your job, your workers’ compensation can work together with your life insurance, helping to cover your funeral expenses and leaving more of your life insurance benefit to your beneficiaries.

Compare life insurance policies

Name Product Issue age Minimum Coverage Maximum Coverage Term Lengths Medical Exam Required
Prudential
18 - 75 years old
$100,000
$10,000,000
10, 15, 20, 30 years
Yes
Customize your term life insurance with a long list of life and disability riders. Get a free quote on Policygenius.
Transamerica
18 - 75 years old
$25,000
$10,000,000
10, 15, 20, 25, 30 years
Depends on policy
Purchase a policy worth anywhere from $25,000 to $10 million, with the option to skip the medical exam. Get a free quote on Policygenius.
MassMutual
18 - 80 years old
$2,000
$10,000,000
10, 15, 20, 25, 30 years
Depends on policy
Purchase term life insurance up to age 80 with Finder's #1 ranked company. Get a free quote from this A+ rated insurer on Policygenius.
AIG
AIG
20 - 85 years old
$5,000
$2,000,000
10, 15, 20, 25, 30, 35 years
Yes
Buy term life insurance all the way up to age 85, and choose a policy that lasts up to an incredible 35 years. Get a free quote on Policygenius.
John Hancock
18 - 65 years old
$25,000
$1,000,000
10, 15, 20 years
Depends on policy
Score a low rate on term life insurance with discounts and rewards for your healthy habits. Get a free quote on Policygenius.
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Bottom line

Knowing the details of your state’s workers’ compensation benefits can give you some measure of peace of mind, but a death benefit that’s only payable for a work-related tragedy is no replacement for life insurance, which provides broader, more customizable coverage. And while the amount and type of workers’ compensation coverage you have is out of your hands, you can shop around for life insurance to make sure you get the best policy available to you.

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