It's critical to buy illness cover quickly

House prices have shot up over the past few years but if you really want to see an example of rocketing costs, look at the insurance you can take out to protect yourself against a nasty illness.

Critical illness cover pays out a lump sum if you suffer a specified serious illness such as cancer, a heart attack, stroke or kidney failure or if you have to undergo certain types of surgery. It is often sold to homebuyers when they take out a mortgage.

In recent months some insurers have pushed up their premiums by as much as 60% and several have brought in less favourable terms and conditions too.

The cost is being driven upwards by advances in medicine, which have led to a situation where people are now not only surviving illnesses that would once probably have killed them - they are in some cases able to get back to a normal life quite quickly.

Insurers are jumpy about the fact that people can suffer a minor stroke, collect a "windfall" critical illness insurance pay-out and be back at work after a few months.

This week Norwich Union became the latest big player to announce a hike. New premiums for life insurance with critical illness cover included (most people buy the two together as it's cheaper than buying critical illness cover on its own) will rise by an average of 18% from Monday. Existing policies are not affected.

This comes just weeks after rival insurer Prudential raised its premiums by 40% on average and sparked an outcry by deciding to apply the new higher rates retrospectively to thousands of applications in the pipeline.

The cost of cover may have risen sharply but most experts agree that with continuing improvements in medical science, there's only one way premiums are going - and that's up. More worryingly, we are seeing growing numbers of companies changing their terms, such as adding exclusions.

So this may be one of those rare examples where the financial salespeople are actually right when they say it's a case of buy now or lose out. If you are seriously considering taking out critical insurance cover, there's a lot to be said for moving fairly quickly.

There are two main types of critical illness policy. With guaranteed policies, the amount you pay is fixed for the life of the contract. And then there are "reviewable" policies where the insurer will increase premiums every few years.

Most experts see guaranteed policies as a better bet because once the policy starts, the premiums will not change for the lifetime of the plan.

Kevin Carr at specialist life insurance broker LifeSearch (lifesearch.co.uk) says guaranteed rates are typically only 10% higher than reviewable rates.

In the past two months two major insurers, Prudential and Scottish Equitable, have pulled out of guaranteed policies completely. Others are expected to follow suit soon.

"At the moment we are only recommending guaranteed policies to our clients," says Jason King at insurance broker Life Policies Direct (lifepoliciesdirect.co.uk). He adds that he wouldn't be surprised if in 12 months' time there were no companies offering guaranteed policies.

Things are changing all the time but Mr Carr says that at the moment, Legal & General is one of the most competitive guaranteed policy providers. Those companies rated by Mr King include L&G, Norwich Union and Liverpool Victoria.

The move away from guaranteed rates isn't the only unwelcome development. Definitions have been tightened up by industry body the Association of British Insurers. For example, as a result of a massive increase in diagnosis of prostate cancer, only advanced stages of the disease will now be covered. Again, these changes don't affect existing policies.

Prices may be soaring, but so are sales of critical illness policies. There are almost six million policies currently in force in Britain of which 1.2 million were taken out last year. But do you need critical illness insurance? Some experts argue that for many people, permanent health insurance is going to be the priority - or life cover if they've got dependants. And for some people, benefits on offer from their employer may make a policy unnecessary.

Critical illness cover is complex and it is crucial to shop around for the best possible deal. "Always get at least three quotes and be sure to compare their different features and benefits," says Mr King.