Social insurance is any government-sponsored program with the following four characteristics:
Social insurance has also been defined as a program whose risks are transferred to and pooled by an often government organisation legally required to provide certain benefits.
In the US, programs that meet these definitions include Social Security, Medicare, the Pension Benefit Guaranty Corporation program, the Railroad Retirement Board program and state-sponsored unemployment insurance programs. The Canada Pension Plan (CPP) is also a social insurance program.
The World Bank's 2019 World Development Report on The Changing Nature of Work considers the appropriateness of traditional social insurance models that are based on steady wage employment in light of persistently large informal sectors in developing countries and the decline in standard employer-employee relationships in advanced countries.
Typical similarities between social insurance programs and private insurance programs include:
Typical differences between private insurance programs and social insurance programs include:
With social insurance, the beneficiary's contributions to the program are taken into account. A welfare program pays recipients based on need, not contributions. In the US, Medicare is social insurance, and Medicaid is welfare.
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