Insure, and sleep easy

Surviving a serious illness or accident can make us appreciate how much we have in life. But it also can be financially crippling to give up work for a time, or for ever. Statutory sick pay lasts 28 weeks, but this could be as little as pounds 55.70 a week, and though you may be able to claim other benefits, your income may fall sharply if you are unable to work for a long period.

Two types of insurance can help relieve this burden: permanent health insurance (PHI), sometimes known as income replacement insurance, and critical illness insurance.

PHI will pay a regular income if you are unable to work due to illness or disability. The policy will pay you an income after an agreed deferred period of time: four, 13, 26, 52 or 104 weeks. The longer the deferred period you choose, the lower your premiums will be. You could choose a deferred period that will enable PHI payments to kick in once other sources of income, such as statutory sick pay or savings, run out.

Your PHI policy will continue to pay you an income until you are able to return to work, or reach retirement age. You should check whether the return to work clause means a return to your own occupation or to a similar type of work. Premiums are based on your age, sex, profession (some jobs are more risky than others), and your present health.

Critical illness insurance pays out a lump sum if you are diagnosed as suffering from a life-threatening disease, or if you become permanently disabled and so are unable to continue working. Money may not get rid of a disability, but it can go a long way towards relieving any financial concerns.

You can use the money in any way you choose. You may use it to adapt your home, pay off your mortgage or convalesce abroad. As Tony Owen of Barclays Life points out: "A lump sum of money can help you get back on track. If you have to give up your job, you may be able to use the money to help you start up your own business, or you can invest the money and draw an income from it while you look for another job."

Barclays Life is one of 60 organisations that offer critical illness insurance. The cover is offered by many life insurance companies, banks and building societies, as well as some friendly societies such as Tunbridge Wells Equitable.

Given that working adults are 10 times more likely to have to stop work due to a critical illness than they are to die before they reach age 65, according to the Association of British Insurers, insurance can be a good investment. Research shows that more than one in two people believes insurance against serious illness is very important, yet less than one in 15 of us in fact has critical illness cover.

Most policies cover heart attack, cancer, stroke, kidney failure, major organ transplants and total permanent disability (TPD). After this, policies vary as to which illnesses they cover. Illnesses have to be life threatening if the policy is to pay up. For example, skin cancer may be very unpleasant, but if it is not considered life threatening, your policy will not pay up.

You need to check the TPD definition, as in some cases policies will pay out only if you are unable to perform any occupation as a result of your illness or disability. Most policies, however, will pay out if you are unable to perform your own occupation. Premiums vary enormously, and are based on the cover required, and the policy holder's age. A 35-year- old male non-smoker wanting pounds 50,000 of cover over 30 years with an "own" occupation definition of disability, for example, pays pounds 28.95 a month for cover from Zurich Life.

Alternatively, you can buy critical illness cover linked to your mortgage, from around pounds 10 a month. Unlike stand-alone policies, you do not receive a lump sum if a serious illness strikes; instead the outstanding mortgage is paid offn