CII Certificate in Insurance - Award in General Insurance (non-UK) (W01) Practice Test

Catastrophic insurance is primarily designed to provide coverage for high-risk events that may result in substantial financial losses. This type of insurance acts as a safety net, protecting individuals or businesses from severe and unexpected events that could have a devastating financial impact, such as major accidents, critical illnesses, or large-scale disasters. By offering a high deductible and lower premiums, catastrophic insurance policies ensure that the insured has coverage for significant claims, which could otherwise be prohibitively expensive.

The focus on high-risk events allows policyholders to manage their financial exposure to scenarios that are not just likely to occur, but that could also lead to extraordinary costs. This differentiates catastrophic insurance from other types of insurance that might cover more routine or minor expenses, ensuring that it serves a specific need in the insurance landscape.

The other options describe characteristics that do not align with how catastrophic insurance is structured or intended to be used. For instance, it does not cover minor medical expenses as that falls outside its scope. While it may provide some coverage in the event of natural disasters, it is not limited to this alone, as it encompasses a wider range of high-impact risks. Lastly, describing it as designed for low-cost coverage is misleading, as the aspect of having a high deductible implies that