Governments make decisions about how to protect their citizens against risks usually considered beyond people’s control, such as unemployment, disabilities, retirement, health care costs, and death of a family’s wage earner.
Each society must decide who will shoulder some, all, or none of these risks. In the United States these risks are covered in a variety of ways, both privately and publicly. The United States government plays an economic role in helping people manage the loss of income through social insurance programs. These programs include Social SecurityThe comprehensive federal program of benefits providing workers and their dependents with retirement income, disability income, and other payments. The Social Security tax is used to pay for the program. , unemployment compensationPayments made under state-administered programs to qualified workers who become unemployed. To qualify, a worker must be involuntarily unemployed (terminated from a “covered” job) and be willing and able to take new employment. Programs are employer financed except in a few states that require small employee contributions. , workers compensationA system of compensation for work-related injuries or death, paid for by employer contributions. , and MedicareA federal program that pays for certain health care expenses for people aged 65 or older. Enrolled individuals must pay deductibles and co-payments, but much of their medical costs are covered by the program. .
What is Social Insurance?
Social Insurance is a set of government programs that are meant to protect individuals and families from hardships and uncertainties. Social insurance is required by state and federal laws, and it is, therefore, mandatory that individuals and businesses (employers) pay for these programs. Virtually everyone in the United States directly or indirectly receives benefits from these programs.
Although social insurance programs (Social Security, Medicare, etc.) provide an important safety net for millions in the United States, many individuals supplement social insurance by voluntarily buying private insurance and investing in retirement plans.
When a wage earner retires, dies, or becomes disabled, they or their spouses may be entitled to social insuranceInsurance that is provided by government. benefits. Benefits provide what some call a “cushion” against financial difficulties caused by these hardships. Some social insurance programs and their benefits are described below:
- Social Security
- Benefits that are paid to workers when they retire (based on average earnings over time). More information can be found on the Social Security Administration website.
- Survivor & Disability Insurance
- Survivors insurance is a type of “life insurance” provided by the Social Security Administration to surviving spouses and children of deceased workers. Someone who is unable to work for a year or more because of a disability may be eligible to receive disability insuranceAn insurance policy that pays benefits in the event that the policy holder becomes incapable of working. , a monthly benefit that is based upon earnings when working. SSI is a benefit paid to disabled adults and children of limited resources. More information on each of these programs is available on the Social Security Administration website.
- Unemployment insurance
- When people lose their jobs because of something beyond their own control (e.g., factory closing, downsizing, bankruptcy of a company, etc.), they are entitled to receive benefits for a certain number of months. The amount people receive is not large but is intended to assist the wage earner as he or she looks for employment and returns to work. Unemployment Insurance is administered on the state level, therefore the guidelines vary by state. To find more information on your state’s guidelines, visit the Department of Labor website and contact your State Unemployment Insurance agency.
- Workers’ Compensation
- This social insurance program is designed to assist people who have injuries or illnesses that are job related. Included in this program are medical costs, some assistance with lost income, and death benefitsAmount payable by an insurance company to beneficiaries after the insured’s death. to survivors of workers killed on the job. Workers’ compensation is also administered on a state by state basis. It is important to research your state specific guidelines.