What is Catastrophic Health Insurance?

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  • Written By: Jeremy Laukkonen
  • Edited By: Allegra J. Lingo
  • Last Modified Date: 28 January 2020
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Catastrophic health insurance is typically intended to deal with only very severe medical issues in countries that do not offer national health care. Most types of private health insurance can be used for anything from doctors visits to expensive surgeries, and require a small or moderate co-payment each time. There may be very high co-payments associated with catastrophic health insurance, which can preclude many less expensive treatments from coverage. Large out of pocket yearly deductible costs may also be associated with this type of coverage before it can provide any coverage. The main purpose of catastrophic health insurance is typically to avoid medical bankruptcy in the face of mounting health care bills.

Health insurance is often expensive, and in some cases individuals or families may not be able to afford it. This can be dangerous, since certain injuries and illnesses may result in very high medical bills. In some cases, uninsured people may even be forced into bankruptcy if they can not afford to pay the costs associated with their treatment. Catastrophic insurance is one potential way to avoid these situations. It is typically less costly than other insurance on a month-to-month basis, but is often substantially more expensive in terms of co-payments and deductibles.


Another term for catastrophic health insurance is high deductible insurance. When used in an insurance context, deductible refers to the out of pocket amount that a person must pay each month or year before the insurance company picks up the remainder of costs. Some plans have very low deductibles or none at all, so that insurance ends up paying for at least part of every medical bill. Catastrophic health insurance will typically have a deductible so large that it will only be useful in paying for expensive hospital bills and treatments for serious illnesses.

There may also be large co-payments associated with catastrophic insurance. This means that the insured person may need to pay a certain amount of money each time medical care is rendered. Coupled with a high deductible, this can make catastrophic health insurance primarily useful in avoiding the types of bills that could otherwise cause severe financial hardship or bankruptcy.

Major medical health insurance may refer to catastrophic insurance or plans that are somewhere in the middle. With a major medical health insurance plan, the individual or family may have a limited number of doctor's visits covered, or none at all. The deductibles and co-payments for these plans can vary, so they may be useful for routine preventative care, or only for more severe injuries or illnesses.



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What's the point of getting insurance if you have to pay a high premium and high deductible?

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