Social insurance and welfare programs can be categorized as social security programs. This is because the financial benefits from the two programs are mainly aimed at providing relief to the poor people, enhancing social protection, assist in wealth distribution and encourage people’s integration. The two programs safeguard the public against the unforeseeable circumstances such as diseases and financial hardships. The employed people are also protected against job loss. People usually sign for either of the program in order to acquire some financial reimbursements incase the insured event occurs. Although no one can be able to compensate an individual fully for the loss incurred, the program aims at aiding the member to take care of the medical charges and daily expenses. The government may also use welfare programs to ensure equitable distribution of resources within its residents. Although social welfare programs can be classified as charitable organization, both welfare programs and social insurance program are characterized with mutual cooperation. It is therefore not appropriate to totally separate the two. However, there are some clear distinctions between the two social security programs. This paper seeks to distinguish social insurance programs from means-tested welfare programs.
Among the major distinctions between the social insurance programs and the social welfare programs is the source of funding. It should be noted that social insurance programs is mainly a contributory contract which is entered between the insurance company and the insured party. Different premiums may be set depending on the insurable interest and amount. Various factors are also used when determining the amount of money to be periodically submitted by the contracting party. In most cases the benefits are determined by the primary insurance amount and the age of the policy holder. An individual can opt to take a retirement benefit or even a disability cover which will mature on retirement or disability event. In such a case regular contributions will be required so long as the employees continue to enjoy the cover. The insurance companies use the PIA (primary insurance amount) formula to calculate the benefit that payable to the policy holder. Regulations the PIA will be a function of the average indexed monthly earnings (AIME) (Social Security Administration, 8). On the other hand the social welfare program is usually financed by the government or non-governmental organization to uplift the economic standards of the people within the community. The program therefore acts as a growth and development infrastructure used by the government to distribute its resources to the residents. The program nevertheless aims at uplifting the less fortunate members in the society. The welfare benefit depends on the amount set aside by the government.
The social insurance program tends to assist the members to improve their financial status. This is done by reimbursing them with the lump sum amount whenever the policy matures or if the insured event occurs. And if it is a health policy, then the insurance will cater for the medical expenses which the member incurs while ailing. The amount reimbursed by the insurance company in this case cannot exceed the assured amount. This is because insurance company does not aim at benefiting the policy holder, but instead it aim at restoring him or her back to the previous status (Kingson and Schulz, 45). On the other hand social welfare is a mean tested program which aims at aiding the poor financially or by providing them with basic needs. The government and the non-governmental organizations can therefore choose the kind of program to implement. The programs implemented mainly depend on the people’s needs at that given time. The program can be cash based, child support and care, energy assistance or even a vocational service provision. Additionally, the welfare program can take the form of medical or food assistance. The needy people can in this case be financed or supported partly or wholesomely depending of the amount set aside for the task (Nadasen, 114). The beneficiaries of the welfare programs are the unfortunate people who barely afford the services offered by the government.
The social security program mainly covers the employed persons. Individuals can in this case either be self employed or an employee in the state, local government or in the armed forces. The social security covers are mainly signed in upon employment. It is estimated that 96 % of the US jobs were covered by the year 2002. Although the US government intends to make the coverage compulsory, there is still a good number who have not yet signed for the cover. The majority of the social security programs within the US market are subjected to tax (GPO Access, 4). The insurance company will require some regular premium submission as agreed in the contract. Since an insurance program is a contract between two parties, the parties must have a contractual capacity for them to engage in an enforceable contract. The social insurance program can be taken to be a saving plan in which the policy holder regularly saves his or her income for future use or for use incase the insured event occurs. The plan therefore enables people to plan for their future by setting some small proportion of their income for future reference or use. Personal commitment and discipline is therefore required in order to effectively manage and adhere to the contract terms. Conversely, the social welfare program targets the unemployed people or people who earn insignificant incomes. In this case the government and the non-government organizations usually enter into an agreement with the household member. The agreement mainly aims at financially supporting the family for a given timeframe. In such a scenario the household will be required to follow a given financial budget as agreed in the contract.
The employees in the social security trust funds are financed and governed through the Federal Insurance Contribution Act (FICA). While the Self-employed Contribution Act (SECA) governs the self-employed trust funds. Both FICA and SECA determine the amount of tax that the trust fund will be subjected (GPO Access, 5). Conversely the treasury and the respective NGOs monitor and govern the social welfare funds.
Social insurance programs are intended to prevent poverty by encouraging members to regularly save towards certain future events. The different premium setting encourages individual savings regardless of the income level. The program also relieve the members some financial hardships which they would otherwise have suffered. Social welfare programs on the other hand seek to alleviate poverty. This means that the program can only be directed to poor people in order to assist them advance financially. The program has a lot of stigma since the people tend to benefit for nothing (Segal, 54).
Social insurance programs are mostly privately regulated by the various insurance companies. Quality services are therefore guaranteed to the policy holders since the private entities advocate for accountability and quality management. Conversely, the social welfare programs are politically instigated and thus lack accountability. The success of social welfare program solely depends on the political goodwill of the political leaders.
The social insurance program is neither determined by the income of the policy holder’s income nor is it determined by the amount of benefit, instead it is determined by the amount of savings that the individual submits towards the plan. Someone might have a considerably high amount of income, but opt to save minimum amount to cater for medical and other benefits. Conversely, a low income earner can heavily invest towards his future financial plan. Social welfare on the other hand is greatly determined by the amount of income earned by the beneficiary, the little the income the more the government will opt to raise the assistance program.
Both the social insurance and welfare programs are inflation protected. The social insurance program is however worse influenced by the inflation compared to the social welfare.
In conclusion it should be noted that social insurance programs is mainly a contributory contract which is entered between the insurance company and the insured party. Different premiums may be set depending on the insurable interest and amount. On the other hand the social welfare program is usually financed by the government or non-governmental organization to uplift the economic standards of the people within the community. The social insurance program tends to assist the members to improve their financial status. This is done by reimbursing them with the lump sum amount whenever the policy matures or if the insured event occurs. On the other hand social welfare is a mean tested program which aims at aiding the poor financially or by providing them with basic needs. The government and the non-governmental organizations can therefore choose the kind of program to implement. The social insurance program is mainly applicable to either self-employed or someone who have a regular income. This is because the insurance company will require some regular premium submission as agreed in the contract. Conversely, the social welfare program targets the unemployed people or people who earn insignificant incomes. Social insurance programs are intended to prevent poverty by encouraging members to regularly save towards certain future events. Social welfare programs on the other hand seek to alleviate poverty. This means that the program can only be directed to poor people in order to assist them advance financially.
Works Cited
GPO Access. Social Security: The Old Age, Survivors and Disability Insurance Programs Section. 2004. Web.
Kingson, Eric and Schulz, James. Social Security in the 21st century. New York: Oxford University Press US, 1997. Print
Nadasen, Premilla. Welfare in the United States: A History with Documents, 1935–1996. New York: Routledge, 2009. Print
Segal, Elizabeth. An Introduction to the Profession of Social Work: Becoming a Change Agent. London: Cengage Learning, 2009. Print.
Social Security Administration. Benefit calculation examples for workers retiring in 2010. Web.