Critical illness insurance pays you a lump sum if you are diagnosed with a covered illness; there are typically 25 of them, including heart attack, stroke and cancer. You should not consider critical illness insurance until adequate life insurance and disability insurance are in place. Let’s think about why this is true.
What critical illness insurance does do is give you a lump sum of cash at what is presumably a terrible time in your life. If it gives you peace of mind, I see no problem with buying a small amount of critical illness insurance. It is more of an emotional decision than a financial one. For a 30-year old male or female, a Term 20 critical illness policy for $50,000 might cost around $25 a month.
There are some cases, such as self-employed people who have trouble qualifying for disability insurance, where critical illness insurance could be thought of as a substitute for disability insurance. Keep in mind, though, that critical illness insurance only pays once. It will not be helpful in the event that a covered illness results in a long-term disability.