How to save big bucks on workers’ comp death benefits if you already offer life insurance for your workers.
Editor’s comment: Here is a little-known Illinois legislative provision for your consideration. In this very tough economy, please read carefully and save every penny you can. Please understand Illinois death benefits are wildly high—we understand they are the second or third highest of the fifty United States. While we feel bad for widow(er)s and children, we truly feel death benefits have to be reasonably brought into line with our sister states, particularly when you remember this is a no-fault system and the worker may be part of the cause of his/her passing and benefits will still be due. It is also very unusual to see someone making $150 per week whose widow(er)s and dependents then get tax-free death benefits at a rate triple what their spouse/parent was making at the time of their passing.
The current Illinois death benefit minimum is $456.28 times 52 weeks times 25 years or $593,164.00. The current maximum is $1,216.75 times 52 weeks times 25 years or a cool $1,581,125.00.
If you already have a policy of life insurance for your associates, you can get credit for such benefits against workers’ comp death benefits that may also be due. The life insurance policy has to state the benefits will be paid in lieu of workers’ compensation death benefits. We are confident very few health, risk and safety managers know this little-known facet of Illinois WC law and practice. If the life insurance policy clearly states the insurance benefits are to be paid in lieu of workers’ comp death benefits, your organization saves the full value of the policy in the event of the untimely passing of an employee in a work-related accident. Please note the worker’s family and dependents will still get the full WC death benefit outlined above. The money will either be paid completely from your WC program (with the life insurance paid on top of that benefit) or it will be paid by both your WC program and the life insurance policy.
Please understand claimant lawyers typically don’t want such credits to be allowed. If there is a dispute about coverage and they win WC benefits for their clients, they don’t get a fee on the life insurance policy credit. You have to make certain the credit is very clear in the policy language. We ask all of you to take a look at the coverages afforded to insure you know whether you are going to get a credit or not. If you want a KC&A lawyer to review the policy provision, send it along and we will give you our opinion at no charge.
For one of our insurance client’s accounts, we were advised there was a $500K life insurance policy paid for by the account on their workers. The account would immediately save $500K on any death claim for their workers if you simply have the account or its insurer make the life insurance benefits payable in lieu of workers’ compensation death benefits due under the Act. The account could also save on the workers’ compensation premiums. If the life insurance policy doesn’t say the benefits are to be paid in lieu of workers’ comp benefits, the widow(er) gets both the full WC death benefit and the life insurance proceeds.
If you want the savings, please, please, please have your life insurance policies changed or let us review it at no charge.
The Illinois WC Act says:
Section 4(I): If an employer elects to obtain a life insurance policy on his employees, he may also elect to apply such benefits in satisfaction of all or a portion of the death benefits payable under this Act, in which case, the employer’s compensation premium shall be reduced accordingly.
We are certain the “election” has to be made prior to the passing of the employee. Please reply or call if you have further questions.
