What exactly is critical illness insurance?

Not everybody will become critically ill in their lifetime. It is natural to assume that it may never happen to you. It is well worth thinking about, however, because being diagnosed with a critical illness could cripple your family's finances. If you are the main earner in your household and you become unable to work, you and your family will still need to meet all your monetary obligations - for example your mortgage and childcare costs.

How could critical illness insurance help?

If you are covered by a policy and are diagnosed with an illness covered by that particular policy, you will receive a tax free cash sum. Depending on its size, the cash payout could go a long way to support your family during a difficult time. Critical illness insurance could support your family in other ways too: for example, some insurers will extend your cover to your children for no extra cost.

Is it expensive?

That depends on a number of factors, such as:

• The individual insurer. If you have life insurance you may be able to combine it with critical illness cover. This may not necessarily be cheaper than buying a new policy, so make sure you know what's out there.
• What you want to be covered for. In some cases, the more illnesses a policy covers, the more expensive it will be. It is important to choose a policy that includes a range of illnesses that could affect you. It may not make financial sense, however, to buy a policy that covers hundreds of illnesses you probably won't be at risk from.
• How much you want the insurer to pay out if you become critically ill. If you want a very large amount of money you will usually have to pay more per month.
• Individual factors such as your age, gender, occupation and medical history. Having a job that is considered dangerous could increase the amount you pay, for example.

What else will I need to consider?

It is vitally important that, before you buy any policy, you read its terms and conditions. This is because a policy will state that it covers a range of illnesses, for example cancer, stroke, heart attack etc, but certain terms may have to be met to achieve a payout. For example, many insurers will not cover less advanced cancers. These are the kinds of facts that you need to be aware of.