Critical illness cover pays out a tax-free lump sum if you are diagnosed with a major illness, including cancer, heart disease and stroke. Actual illnesses covered in a policy may vary between providers. Many insurers will make a part payment on an early-stage diagnosis of a condition specified in the policy, the percentage varying from company to company.

Many people buy a combined life and critical illness policy, and it makes sense to do so. In this case, a payment would be made on either diagnosis of a critical illness as defined in the policy, or death, whichever is the sooner. If the cover is combined in this way, the policy premium is usually cheaper than it would be for separate policies, as there is only ever one lump sum paid out by the insurance company.

Note - each policy provider covers has different definitions of critical illnesses so ensure you read the policy documents prior to taking up a policy.