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A critical illness policy benefits you. Life insurance benefits your family.

Critical-illness insurance buys peace of mind.

Critical illness insurance is the right decision, should you ever experience a critical illness. Unlike disability insurance, critical illness benefits pay out almost immediately. The main conditions are that the recipient must survive the first 30 days. Once your claim has been submitted, you can rest easy knowing your finances are looked after and you can concentrate on getting better.

Critical-illness insurance provides a lump-sum payment to a policy holder facing cancer, heart attack, stroke and a range of other life-threatening illnesses that varies by company. It was created in the 1980's by the renowned heart surgeon Marius Barnard, who worked on the first human heart transplant with his brother, Christiaan. He became so frustrated watching patients’ financial struggles as he treated them that he convinced insurance companies in his native South Africa to create a product. In the early 1990s, he brought the concept to Canada.

It’s important to work within an individual’s budget when choosing critical illness insurance. Here are some of the ways to manage costs:

1. Look at smaller coverage amounts. You want to ensure you are going to be able to continually cover the payments.

2. Tailor the policy to cover only heart attack, stroke and cancer. These three conditions account for about 80 per cent of claims, although policies can now cover more than two dozen illnesses. Review your family history though, to ensure you have any potential threats covered.

3. Buy early. The price rises about 8 per cent every year. Unfortunately, prices become very expensive once someone hits their late 50s, almost doubling from what they would be for someone in their late 40s. Consider coverage as early as possible.

4. To reduce costs, consider a 10-year term, which could cut premiums by about 40%. Be sure you understand the differences between term and permanent insurance though.

5. Avoid return-of-premium contracts. These policies cost more because they refund some or all of a premium when the policy matures, if no claim has been paid. These seem attractive at first but be sure to consider how much more you would be paying into this type of plan with no guarantee that you would never be making a claim.