Catastrophic Illness Insurance

Definition - What does Catastrophic Illness Insurance mean?

Catastrophic illness insurance is insurance coverage that protects the insured for a specified duration in the event they develop one of the major health conditions or issues listed in the policy. Generally, the benefit comes in a lump sum payment. Coverage may include stroke, heart attack, cancer, and long-term hospitalization, among other critical health issues. This form of health insurance can provide additional coverage on top of an existing health or disability policy.

Catastrophic illness insurance is also known as critical illness insurance.

Insuranceopedia explains Catastrophic Illness Insurance

Health insurance covers many medical expenses, and disability insurance provides partial income replacement in the event of a catastrophic illness. However, those two types of insurance do not necessarily allow a person to maintain their full, pre-illness income and pay for all the necessary medical treatments or other needs. In this case, catastrophic illness insurance can prove beneficial by making more funds available, following the policyholder being diagnosed with a critical illness. It is meant to prevent bankruptcy as a result of an expensive or lengthy health issue.

Though restrictions vary with the provider, most would reject a claim as a result of a pre-existing condition, if the policyholder does not survive 30 days following the diagnosis, and they receive a critical diagnosis within 90 days after the policy comes into force.

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