Types of Social Insurance

Life's journey is not always pleasant. Some troubles are small and manageable, while others, like disability or the unexpected death of a primary breadwinner interfere with our ability to live happily and productively. To provide support, federal and state governments, with the cooperation of employers, have established different types of social insurance programs. Social insurance helps many families cope with loss or hardships due to unemployment, retirement or disability.

The most common form of social insurance, Social Security, helps retired or disabled people and their families maintain a healthy standard of living. According to the National Academy of Social Insurance, one out of every four households receives monthly income from Social Security. The programs through which disabled and retired beneficiaries earn their income, receive funding through tax deductions paid by today's workers and their employers. Unlike other social insurance programs, Social Security is an entitled payment program and not based on the particular living needs of the beneficiary. The payments received by a person reflect his payment history into the Social Security program and must satisfy the beneficiary's lesser ability to maintain a certain standard of living while helping him cope with potential health and financial risks.

Medicare covers many of the medical expenses of elderly and disabled workers and veterans. Medicare has several different programs levels, which affect the types of benefits received by the beneficiaries. Certain plan levels cover different procedures and will provide assistance with bills incurred through hospital stays, prescription coverage, and doctor appointments. Like Social Security, Medicare receives funding through taxes deducted from current workers.

Worker's Compensation is a social insurance program designed to protect employees who experience on-the-job injuries. The state-mandated programs cover a percentage of the medical costs incurred because of the injury as well as recovering a portion of the employee's lost wages due to time off from the injury. Compensation insurance also provides a disability program that helps disabled workers maintain a sustainable income for their families. In addition to protecting employees, the insurance purchased by employers through the compensation programs provides protection from lawsuits initiated by the injured employee.

Unemployment Insurance offers temporary financial protection for workers who experience unexpected layoffs due to lack of work and other reasons that are no fault of the employee. Unemployment programs also protect workers who experience unemployment due to natural disasters like floods and hurricanes. Funding for unemployment insurance is through the employer's unemployment tax. Companies can keep their tax rates lower by preventing claims and disallowing unwarranted claims. States determine employee eligibility by reviewing work and earnings history. Applicants must meet certain requirements, which can vary by state, and they must continue to satisfy eligibility requirements throughout their claim. Because unemployment programs have a limit of 26 weeks (although some circumstances allow for extensions), workers may have to register with a state employment service to obtain sustainable employment.