How National Insurance Works

National insurance scheme is in fact a social security scheme run by the government of a country for the required financial security of its citizens, more particularly for the persons who are employed in various organizations or self-employed or non-employed.

Although, the scheme has multifarious advantages towards attaining a just socioeconomic system, and even though, our country has a vast prospect for introducing such a scheme, nevertheless, this has not gained any access as yet into our country.

Most developed countries do have a scheme as such in one form or the other and the students would do well by having a preliminary knowledge on the subject. The following studies will take into account the system practiced in United Kingdom as it is thought to be in the best possible form.

BASIC CHARACTERISTICS

  1. The Scheme is administered by the government and, therefore there is no entry for the private insurers.
  2. There are no policies of insurance and the scheme is managed by stamping of cards. The government issues these cards to each individual coming under the scheme and the cards remain with the individuals.
  3. The premium (specifically known as contribution) is normally deducted by the employers at source and credited to appropriate government authority. In case of self-employed or non-employed persons it is their individual responsibility to get their cards stamped, the stamps being available at post offices.
  4. The solvency of the scheme is guaranteed by the state.

APPLICABILITY OF THE SCHEME

The scheme applies compulsorily upon all in the following categories;

Class 1 – Employed persons.
Class 2- Self-employed persons.
Class 3- Non-employed persons.

Within each class no differentiation is made according to risk involved and, therefore, there is no scope for selective underwriting. Each class is entitled to different rates of benefit.

CONTRIBUTION

The rates of contribution (premium) are at standard rates for all persons in a particular class. But the rate varies from class to class. Similarly, there is a standard rate of benefit for each class and the rate varies from class to class. Only the state may vary rates of contribution, benefits and conditions.

COVER

  1. Under such a scheme cover is mainly provided in respect of:
  2. Unemployment benefits payable weekly.
  3. Industrial injuries or sickness leading to disabilities, iii) Free medical provision under Health Service.
  4. Pension.
  5. Maternity grants and allowance.
  6. Family allowances payable weekly for dependent children, excluding the first issue.
  7. Death grant.