A Catastrophe Savings Account must be established for which purpose?

A Catastrophe Savings Account is specifically designed to assist policyholders in preparing for significant financial burdens that come from catastrophic events. The primary function of this type of account is to provide a dedicated savings mechanism that can be used to pay for insurance deductibles associated with such catastrophic events. By allocating funds to this account, individuals can effectively manage their risk and ensure they have the necessary resources available when faced with unexpected disasters that require them to pay substantial deductibles.

The purpose of the account centers around offering financial protection and peace of mind, ensuring that individuals are not entirely caught off guard when significant events occur. The assets within a Catastrophe Savings Account are earmarked for the specific purpose of covering these deductibles, making it a critical tool in personal financial planning for those who wish to remain financially stable in the face of potential large losses.