What Are Catastrophic Insurance Benefits?

Catastrophic insurance covers a sudden and extremely damaging loss. It's coverage taken to ward against the astronomical costs of such an event. However, unlike a traditional plan, catastrophic insurance doesn't cover basic health and property insurance needs.

Payouts

• In the event of what Investopedia calls a "major health event" or, even, a severe natural disaster, the catastrophic insurance policy pays the insured in one payment. This can be payment of the full policy amount or part of that amount, depending on what the insured needs. After a full payment, the policy is no longer valid as the maximum benefit has been paid.

Identification

• Catastrophic insurance is also called "critical illness insurance" or "major medical insurance."

Significance

• Catastrophic insurance benefits are necessary to cover the types of medical and property claims that would "max out" a normal policy. They're also created to keep the policyholder financially above water while recovering from a major event.

Features

• Catastrophic insurance benefits cover both inpatient and outpatient expenses due to a "catastrophic injury." They also cover property damage outside of the norm, such as hurricanes, floods and tsunamis.

Misconceptions

• A very expensive deductible is often necessary in order to access benefits. However, the policy premiums are inexpensive compared to regular insurance plans.