A catastrophe loss refers to a type of loss that is extremely serious and random. In other words, it is one that has a devastating effect and cannot be foreseen. Thus, it is very difficult to prepare for without insurance. Catastrophe insurance exists to prevent individuals and businesses from suffering immense financial losses in the event of a major disaster.
Many general hazard insurance policies do not include coverage for catastrophes, such as earthquakes, sudden loss of life, volcanic eruptions, avalanches, and so on. This is because the chance of them happening to the average person is low and the costs are very high. However, they may occur and can cause enormous amounts of destruction, both physical and financial. Therefore, catastrophe insurance exists to financially protect people who live in high risk areas for such disasters as avalanche, earthquakes, or tornadoes.
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