What is defined as catastrophic coverage?

Catastrophic coverage refers to a type of insurance designed to protect individuals from significant financial loss due to severe or unexpected events, such as major health issues or accidents. This coverage typically involves high coverage limits, which ensure that significant costs associated with catastrophic events are covered, but it is structured with high deductibles. This means that the insured party must pay out of pocket for a large portion of their expenses before the insurance coverage kicks in. This structure allows the insurer to provide coverage for extreme situations while keeping premiums lower, making it accessible for individuals who may not frequently require medical services. The focus on high limits for severe losses captures the essence of what catastrophic coverage aims to provide: substantial financial protection when needed most.

In contrast, insurance that covers routine medical expenses does not align with the concept of catastrophic coverage since it deals with day-to-day health costs rather than severe incidents. Low deductibles are typically associated with more comprehensive health plans, while the definition of catastrophic coverage inherently involves higher deductibles. Lastly, limiting insurance only to natural disasters does not reflect the broader application of catastrophic coverage, which can extend to various types of severe and costly events beyond just natural disasters.