SOCIAL INSURANCE — MEANING, CHARACTERISTICS AND REASONS

Social insurance is a type of insurance in which the government steps in to the insurance market to offer people protection from the risk of any emergencies that could cause them to experience financial difficulties.

It is a type of insurance designed to help certain or all segments of society.

Social insurance may also be defined as government-run insurance programs formed to protect citizens from unforeseen economic and financial risks.

Some of the most well-known examples of social insurance include social security, public health insurance and unemployment insurance.

Social insurance is primarily intended to cover risks that are difficult to individually insure.

It is designed to ensure all or part of the population of a country against certain types of risks, such as injury, sickness and unemployment.

Characteristics of Social Insurance

1. It is compulsory: Social insurance programs are typically mandatory for everyone in order to provide adequate and appropriate protection for those who are covered by the insurance.

2.  Benefits prescribed by law: The benefit of a social insurance program is usually prescribed by law

Additionally, the amount and eligibility requirements of the social insurance are also prescribed by law.

3. No means tests: Benefits of social insurance are given as a matter of right, without any means test.

Indeed, there is an assumption about the need for social insurance programs.

4. It is state-funded: The majority of social insurance programs are paid for by taxpayer money.

It must be recognized, nevertheless, that social insurance may also be paid for by participant premiums.

5. Emphasis on social adequacy: Social insurance advocates social adequacy rather than individual equality.

6. Nominal contribution: People only make minimal contributions to social insurance, usually no more than they can afford.

Reasons for social insurance

Social insurance programs are provided for various reasons, including;

1. To serve as the basis for the economic security of a country.

2. To solve complex problems that may require direct government intervention.

3. To provide coverage against peril that are difficult to privately insured such as unemployment etc.

4. To alleviate poverty by providing essential services like healthcare to people who might not otherwise be able to afford them because of their financial situation.

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