Catastrophe Insurance
What Does Catastrophe Insurance Mean?
Catastrophe insurance provides coverage for catastrophic events, including natural disasters such as earthquakes, floods, and hurricanes, as well as man-made disasters like terrorist attacks.
This type of insurance can be offered as a commercial product for businesses or as personal insurance for homeowners.
Insuranceopedia Explains Catastrophe Insurance
The events covered by catastrophe insurance are high-cost occurrences with a low probability of happening. Despite their rarity, these risks are often excluded from standard homeowners or business insurance policies. For instance, many homeowners’ policies do not cover certain natural disasters, including earthquakes, sinkholes, landslides, and floods.
When a homeowners’ or business policy offers only partial coverage for these events, catastrophe insurance can be purchased to supplement the protection provided by the primary policies.
Given the scale of the damages covered by catastrophe insurance, assessing and estimating the potential cost of an insured loss can be challenging. This difficulty arises particularly because catastrophic events can lead to a significant volume of claims for substantial losses.
