General Motors Co.’s compensation plan for victims of 2.6 million defective small cars would offer payments for any accidents in which the air bags in the cars failed to deploy, and offer increased payouts to victims who accepted out-of-court settlements before the auto maker recalled the vehicles.

Under the program, the nation’s largest auto maker would provide compensation checks ranging from $20,000 to several million dollars to any driver, passenger, pedestrian or occupant of another vehicle who can show they were…