According to Exquemelin's "History of the Bouccaneers of America" it was one time payment given out when partitioning loot. Exquemelin sailed with Caribbean pirates himself in mid 17th century, so he should know.

Lastly, they agree what rate each one ought to have that is either wounded or maimed in his body, suffering the loss of any limb; as, for the loss of a right arm, six hundred pieces of eight, or six slaves; for the left arm, five hundred pieces of eight, or five slaves; for a right leg, five hundred pieces of eight, or five slaves; for the left leg, four hundred pieces of eight, or four slaves; for an eye, one hundred pieces of eight, or one slave; for a finger, the same as for an eye. All which sums are taken out of the common stock of what is gotten by their piracy, and a very exact and equal dividend is made of the remainder.

He describes the process in detail after l'Olonnais attack on Maracaibo:

Having made an exact calculation of all their plunder, they found in ready money 260,000 pieces of eight: this being divided, every one received for his share in money, as also in silk, linen, and other commodities, to the value of above 100 pieces of eight. Those who had been wounded received their first part, after the rate mentioned before, for the loss of their limbs: then they weighed all the plate uncoined, reckoning ten pieces of eight to a pound; the jewels were prized indifferently, either too high or too low, by reason of their ignorance: this done, every one was put to his oath again, that he had not smuggled anything from the common stock. Hence they proceeded to the dividend of the shares of such as were dead in battle, or otherwise: these shares were given to their friends, to be kept entire for them, and to be delivered in due time to their nearest relations, or their apparent lawful heirs.