How to Insure Your Income: Social Security As Income Insurance Introduction
Almost all jobs are covered by Social Security -- and nine of every 10 American workers pay into the system. The Social Security System was enacted in 1935 to provide retirement benefits for covered workers. By 1939, Social Security also provided survivors benefits to the families of covered workers.
About seven million adults were receiving Social Security benefits based on disability in 1994.
A technical note: What we refer to as Social Security is more properly called Old Age Survivors and Disability Insurance (OASDI).
The program pays four types of benefits:
1) disability benefits to workers;
2) Medicare benefits;
3) retirement benefits to workers and their dependents;
and 4) survivors benefits to a worker's family.
As we've already seen, the disability benefits of Social Security are all that many people have to cover income they will lose if they're unable to continue working due to illness or injury.
According to the March 1996 Social Security Bulletin:
The purpose of disability insurance is to protect workers against severe financial hardship when their ability to earn a living is interrupted by disabling illness or injury. As in any insurance program, applicants for benefits must show that the insured event has occurred before benefits are paid.
Disability benefits are modest in relation to the worker's prior earnings. At most earnings levels, benefits amount to less than one-half of prior earnings. The average monthly benefit for disabled workers was $663 in July 1995.
For most people, Social Security would not provide enough money to maintain a middle-class lifestyle. Nevertheless, it is a part of just about every person's total package of income insurance -- so its mechanics are worth considering.
