Critical illness policies pay a tax-free lump sum on diagnosis of major illness, such as a heart attack, cancer or kidney failure, as well as permanent disability. Many also pay out on a variety of surgical procedures such as bypass surgery and major organ transplants. Premiums depend largely on age and sex. As with life assurance, the older you are the greater the risk, so the more expensive the policy. But the premium differences between the sexes evaporate in later life when the man's risk of a heart attack rises.
Costs also vary according to occupation.
An office worker, for example, pays less than a manual worker. There is an alternative to critical illness insurance - permanent health insurance, sometimes called income replacement insurance. It pays a regular tax-free income if a policyholder cannot work after an illness. But it is usually available only to people in work, so if you lose your job or take a career break you may not be covered. Payouts are always job-related.