Do you need critical illness insurance for your family?

Find out what critical illness insurance is all about to determine whether or not it's the right option for you and your family.

The main benefits of critical illness insurance are: it pays out almost immediately after diagnosis and there are no restrictions on how the money is spent. Critical illness insurance pays you a lump-sum of money if you become sick with an illness that is covered by your policy. Most policies cover cancer, heart attack, stroke and other illnesses, which vary from one policy to another.

With disability insurance, money is not paid-out until the recipient is significantly disabled. While this may happen suddenly, such as with an accident, many people with a chronic illness become disabled slowly over time. Although they could use the insurance money to help with their disability, they cannot completely access it.

With critical illness insurance, a person with a new diagnosis of a covered disease can start using the money right away. This prevents the depletion of savings for immediate and ongoing care, especially if that care is not covered by health insurance, such as new or experimental drugs and treatments. Critical illness insurance can also help to offset lost income or provide in-home care, depending what the patient needs or wants. It can even be used for peace of mind spending, such as paying off the mortgage or saving for a child's education. Essentially, critical illness insurance offers choice.

While critical illness insurance can be a lifeline in the right circumstances, people considering a purchase need to watch out for a few things:

• The illnesses covered are very specific. You might think you are covered, but the insurance company's tests or the fine print might say otherwise.
• You may just as easily incur large medical expenses from other health events that are not covered, such as a severe accident or a mental illness.
• Critical illness insurance is costly and the "return of premium" rider, which returns your premiums in full if you do not make a claim before a certain age, increases the cost significantly.

Of course, critical illness insurance policies vary from one insurance company to another. While you may find a policy that fits your needs and your budget exactly, check with several insurers before you decide. Also, do not discount the benefit of peace of mind. You may think you'll have enough savings to deal with a life-altering event, but if you have insurance, you don't have to think about it at all.