Social insurance is an insurance program that provides protection in case you face any sort of economic risk. This could be in the form of a decrease in income due to old age, sickness, or unemployment. It is a type of social security and in fact, at times people use these terms interchangeably.
Another way of defining social insurance is by calling it a co-operative device. The device that aims at granting adequate benefits to the insured person on a compulsory basis. All this is to ensure an individual gets a minimum standard of living in case of an emergency. The basic idea of this insurance is to eliminate risks that an individual may face. Here, the primary effort is that of the social group instead of an individual. So the burden is not on an individual to reduce the incidence of loss on an individual.
Types of Social Insurance Programs
For providing support, governments have come up with various types of social insurance programs. It has helped many families in coping up with hardships or difficult situations. These programs are a medium to provide maximum benefits and begun under Social Security Administration (SSA).
#1: Worker’s Compensation
This is a social insurance program designed to protect the employees who face injuries while working. According to the state, the program will pay a significant amount of medical costs due to injury. Also, during the recovery period, the employee receives a certain amount of lost wages. In extreme cases like due to disability, the workers benefit from a sustainable income for their families. If the employers purchase the insurance under the compensation program then they get protection from lawsuits.
Also read: Guide to What is Insurance and its Types and Components!
This is important as the employee who suffers injury may lodge a complaint.
#2: Medicare
The medicare social insurance program covers the medical expenses of the disabled and elderly workers. Based on the different levels of programs, the types of benefits given to the beneficiaries also vary. There are certain levels that cover different procedures in order to provide assistance with the hospital bills. It receives funding through the tax deduction from current workers.
#3: Unemployment Insurance
Unemployment insurance offers only temporary financial protection for workers. It only applies to those workers who are facing an unexpected layoff due to lack of work or any other reason. The employee should not be at fault at any given instance. It also protects the ones that face unemployment due to natural disasters. For example, due to floods a lot of workers find it difficult to find a job so they get the benefit from unemployment insurance. States review the worker’s eligibility and work history to come to a conclusion. The requirements may vary from state to state.
#4: Social Securing Program
This is one of the most common forms of social insurance programs. It helps the retired or disabled people along with their families to maintain a healthy standard of living. If we go by the calculations of the National Academy of Social Insurance then one out of every four households has been taking benefits of the social security programs. The entire funding source is the tax deductions paid by the current workers and employers. It is an entitled program that means the beneficiary doesn’t receive the benefits based on their particular living standards. So all of them get equal treatment while helping them cope with the potential risks.
What Are The Main Features and Benefits Of Social Insurance?
Social insurance involves the creation of a common monetary fund that provides benefits in the form of cash or any other medium. This fund is built up by the contribution of the State, its workers, and employers.
#1: It’s a matter of right!
The individual who avails the benefits of this insurance doesn’t have to go through any sort of test. The benefits are provided as a matter of right. So the beneficiaries don’t have to compromise on their self-respect.
#2: It’s not a burden on taxpayers.
If you are wondering that the workers will have to bear the pressure of paying a high amount then it’s not. The workers contribute only a nominal amount that doesn’t exceed their paying capacity. The State and the employers are the ones that contribute to the major section of the finances. The best part is that the contribution and benefits of the workers do not have any correlation. So the workers contributing less doesn’t mean they will benefit less.
#3: It is a compulsory set of benefits
It is amazing that social insurance benefits are compulsory. So it is made sure that the benefits reach all the needy individuals.
#4: It is within a fixed limit
If the benefits are in varied range then obviously it is difficult to provide them to all the needy persons. So in order to maintain a standard of living the benefits are within fixed limits.
Also read: What is reinsurance? its definition, types and examples
The social insurance has a great appeal in the prevention of a particular event that leads to loss of income is impossible.
Final Words
Social insurance is based on the thought that there is not always an equal distribution of resources. With the current competitive economy, some people get more benefits while others get less. So the focus is to launch provisions that ensure that the participants do not end with all or no benefits. It means all the participants of this dynamic economy can engage in economic activities without worrying about results. They know that after taking a risk if they land into some sort of emergency the social insurance will help them. In a way, social insurance provides both social stability and social justice to the participants.
Social insurance is not the same as private insurance. Here, the contributions are compulsory. Also, if the insured cannot make contributions then the employer or the State can do the same. The system of social insurance is more of self-financing. Benefits are the right of the beneficiaries. You never know what kind of situation you will face in the future. The benefits of social insurance are many.
By now, we hope the true meaning of social insurance and its benefits are clear to you. In case, you have any sort of doubt then you can send your queries on social insurance through comments. We will try to answer your question on insurance and other topics as soon as possible.
