Learning how social insurance works

Financial institutions: Social security services

Poverty is a global problem. It spawns economic, social, and political inequalities. The poor have always to bear the physical sufferings and indignities of their miserable circumstances. Ignorance, disease, and squalor - and even social crimes - are often the products of poverty.

Although poverty is a world-wide phenomenon, its persistent clutches and punishment are more rampant in Third World countries. Most of these countries are located in Africa, Asia, and Latin America. In these regions, many people are either underemployed or unemployed. A lot of them die without even seeing the face of a doctor or a nurse. About 40 million of their children die every year because of malnutrition and hunger.

On the other hand, the poor in the rich countries like those in the United States, Western Europe,. and Japan live in much better social and economic conditions. For instance in the United States, those who are really willing and able to do whatever kind of work have no employment problems. Those who become jobless get unemployment insurance or pay. People who reach a certain degree receive old-age pensions. Their social security program is sufficient to eliminate problems like housing, medicare, education and other social differences. In America, the poverty line is $8,500 per annum for a family of four.

Social Insurance

Social security refers to a system of compulsory measures intended to protect the individual and his family against the consequences of an unavoidable interruption of serious diminution of income for maintaining a reasonable standard of living. The principal form of provision against social institution which has been developed by society in response to basic felt needs of the people. It has been adopted and improved by individual nations under their particualr conditions and problems.

As an institution, social security is a powerful tool of progress for both the peopl and the country. It is not only a massive movement to save the workers or employees from the hazards of life but it also greatly contributes to economic development.

Social security is compulsory in nature. A man becomes a member of the social security system on the very day he is employed. And by operation of law, he is automatically insured against the perils of death, disability, sickness, and old age. Benefits are extended to the member of the moment the perils take place, and said benefits are payable regardless of however the perils may have been brought about.

Social security is similar to an insurance  since both involve a spread of risk and plurality of members. However, it differs basically from insurance because the relation between a member and the social security system is not governed by contract but by force of law. Social security has not been intended to be the cure for all insurance needs, particularly in a less developed country.

Forerunners of social insurance

The idea of social security came from the old tradition of helping the families of the deceased persons. In those days, each time an individual died, the members of the community contributed money for burial expenses or labor for making the coffin. This practice is still dominant in the rural areas. Such tradition of helping the families of the dead has been transformed by the governments of the developing countries into a philosophy of life for the betterment of life of their peoples.