Insurance as a Social Security Tool

The United Nations Declaration of Human Rights 1948 provides that “Everyone has a right to a standard of living adequate for the health and wellbeing of himself and his family, including food, clothing, housing and medical care and necessary social services and the right to security in the event of unemployment, sickness, disability, widowhood or other lack of livelihood in circumstances beyond his control”.

When the bread winner dies, to that extent, the family’s income dies. The economic condition of the family is affected, unless other arrangements come into being to restore the situation. Life insurance provides such an alternate arrangement. If this did not happen, another family would be pushed into the lower strata of society. The lower strata creates a cost on society. Poor people cost the nation by way of subsidies and doles and so on. Poor people also cost by way of larger growth in population, poor education and vagaries in behaviour of children. Life insurance helps to reduce such costs. In this sense, the life insurance business is complimentary to the state’s efforts in social management.

Under a socialistic system the responsibility of full security would be placed upon the State to find resources for providing social security. In the capitalistic society, provisions of security is largely left to the individuals. The society provides instruments, which can be used in securing this aim. Insurance is one of them. In a capitalistic society too there is a tendency to provide some social security by the State under some schemes, where members are required to contribute e.g. the social security scheme in UK.