DEFINITION of 'Catastrophic Illness Insurance'

A type of insurance that protects the insured, in the event of specified major health events, during a defined period of time. Catastrophic illness insurance coverage is usually a lump sum, and can be full or partial depending on the condition and the policy. Some conditions covered could include (but not limited to); long-term hospitalization, heart attack, stroke or cancer.

Also known as "critical illness insurance". Catastrophic illness insurance can be used to supplement a beneficiary's existing health and disability coverage. Restrictions are unique to the provider, but typically claims will be rejected due to: pre-existing conditions, not surviving 30 days after diagnosis, and any critical diagnosis within the first 90 days.

BREAKING DOWN 'Catastrophic Illness Insurance'

Catastrophic illness insurance will have lower premiums for a younger/healthier person but basic medial costs, such as annual check-ups are not covered. The average payout in 2007 was under $100,000 with an average age just under 50 years old.

Catastrophic illness insurance may also be called a "major medical plan", and will often include expenses incurred both inside and outside the hospital, such as in-home nurse care and lab tests. This type of insurance was created in large part to prevent bankruptcy due to a lengthy or expensive illness, and is even common in some developing nations.

The U.S., in 1986, under President Ronald Regan, explored the possibility of creating a health insurance program called "catastrophic illness insurance". This program focused on insuring the elderly facing long-term expensive healthcare needs through voluntary participation. Initially it gained support but was voted out in the U.S. House of Representatives in 1989.

RELATED TERMS
  1. Health Insurance

    A type of insurance coverage that pays for medical and surgical ...
  2. Catastrophe Excess Reinsurance

    Insurance for catastrophe insurers. Because of the unpredictable ...
  3. Catastrophe Insurance

    Insurance to protect businesses and residences against natural ...
  4. Catastrophe Equity Put (CatEPut)

    Catastrophe equity puts are used to ensure that insurance companies ...
  5. Pre-Existing Condition

    Any personal illness or health condition that was known and existed ...
  6. Personal Lines Insurance

    Property and casualty insurance products for individuals that ...
Related Articles
  1. Financial Advisor

    Critical Illness Insurance: Do You Need It?

    Critical illness insurance could be the only thing protecting you from financial ruin if you're faced with a big health emergency.
  2. Insurance

    Critical Illness Insurance: Get Paid If You Get Sick

    This coverage will allow you to focus your attention on getting well, rather than getting by.
  3. Insurance

    Should You Buy Critical Illness Insurance?

    This type of insurance adds an extra layer of protection for those with a high-deductible health plan, but the coverage tends to be limited.
  4. Insurance

    How to Protect Your Income No Matter What

    What does it mean to insure your income? Here are a variety of ways to do it and some insights into when it might make sense to invest in income insurance.
  5. Insurance

    Elements of Insurable Risks: A Quick Guide

    Explore the elements of insurable risk: due to chance, measurable and definite, predictability, noncatastrophic, random selection and large loss exposure.
  6. Insurance

    How Catastrophic Health Insurance Works

    Catastrophic health insurance is open to people under 30 and those who qualify by income under the Affordable Care Act. But how exactly does it work?
  7. Insurance

    Understanding Your Insurance Contract

    Learn how to read one of the most important documents you own.
  8. Insurance

    What You Need To Know About Student Health Insurance

    Before heading off to college, read up on health insurance plans.
  9. Insurance

    Exploring Advanced Insurance Contract Fundamentals

    Understanding your contract can help you protect our family's financial security.
  10. Insurance

    5 Alternatives to Traditional Health Insurance

    Discover five of the most popular alternatives to traditional health insurance plans, alternatives that are increasingly popular as health insurance costs rise.
RELATED FAQS
  1. What is the average return on total revenue for the insurance sector?

    Learn about the three main segments of the insurance industry, and find out what the average return on revenues is for the ... Read Answer >>
  2. What are some examples of industries that practice price discrimination?

    Understand the various types of insurance coverage offered in the insurance marketplace, and learn why each policy should ... Read Answer >>
  3. Why do growth investors buy insurance stocks?

    Discover why growth investors buy insurance stocks; these stocks are tied to major secular trends such as rising costs and ... Read Answer >>
  4. Why do insurance policies have deductibles?

    Learn the basic concept of an insurance deductible and why they mitigate moral hazards and provide financial viability to ... Read Answer >>
Hot Definitions
  1. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  2. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  3. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  4. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  5. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  6. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
Trading Center