Describe critical illness insurance.

Critical illness insurance is a specialized type of insurance that primarily offers financial protection in the event that the insured is diagnosed with a specific, predefined critical illness, such as cancer, heart attack, or stroke. When the individual is diagnosed with one of these designated illnesses, the policy pays out a lump sum benefit. This payment can be utilized by the insured for various needs, such as covering medical expenses, replacing lost income, or funding specialized treatments that may not be covered by other forms of insurance.

This option correctly reflects the essential purpose of critical illness insurance, which is to provide a one-time financial benefit to help the insured cope with the unexpected financial burdens associated with serious health conditions. The lump sum payment is particularly beneficial since it allows for flexibility in how the funds are used, catering to the unique needs and circumstances of the insured individual following an illness diagnosis.