"I got my daughters ready for school, went to the doctor and he sent me straight to hospital, " she says. "I remember thinking, this can't be right, how can I have a brain haemorrhage? But apparently, I was very lucky to have made it through the night."

Following emergency surgery, Rachel started out on the long road to recovery and, 18 months later, she is now back to her old self.

But health was not the only worry on Rachel's mind. 18 months before getting ill, she had opened her own hairdressing business, Hair Raises, in Skibbereen, Co Cork.

But with Rachel unable to work, the business had to struggle on without her.

Luckily she was covered by critical illness insurance, which pays a tax-free lump sum when the policyholder falls ill with a condition specified in the policy. The money kept the business ticking over until she got back on her feet, paid for her medical bills and also allowed Rachel set up a rainy day fund for the future.

"I only took out the cover nine months before getting sick, after some subtle persuasion from my local branch of Bank of Ireland" she says.

"I was reluctant at first because, at 30 years of age, I didn't think I needed this type of insurance. At the time I didn't have any health problems and I'd never been in hospital in my life. What swung it for me in the end was that the cover was very affordable, 50 a month . . . and that included life insurance as well."

Rachel's story is not untypical according to Noel Finnegan, head of underwriting at Bank of Ireland Life, where more than one in three critical illness claims come from people aged under 45. The average claim last year was for 57,500, with the biggest payout being 450,000.

"It is worrying to see how relatively young many of our incidents of critical illness claims were in the last year, especially when our latest research shows that just onequarter of those aged 25 and over have any financial protection against critical illness, " says Finnegan.

The relative youth of many claimants probably has something to do with the fact that critical illness cover is largely a young person's product, often purchased as an add-on when they buy their first homes. The sooner you buy cover, the cheaper it will be.

A man buying cover at age 30 can expect to pay about 70 a month for 250,000 worth of insurance for the next 25 years. Couples can buy the same cover each for about 147 a month.

Many people are confused about what exactly they are buying, with only a hazy idea of the differences between critical illness and other types of insurance, such as VHI cover, mortgage protection or income protection. The inevitable result is a nasty shock when they go to claim on a policy that does not do what they thought it would.

Medical insurance, such as VHI, Bupa or Vivas, pays medical bills only, leaving you to your own devices once you are discharged from hospital. Mortgage protection and life insurance pays up only on death.

So if you are worried about all the grey areas in between, such as making ends meet if accident or sickness forced you out of work, you need to think about critical illness or income protection insurance.

This is especially important if you are self employed because, in general, only PAYE workers are entitled to social welfare disability benefit, currently 165.80 a week.

Critical illness pays a taxfree lump sum if you succumb to one of the medical conditions specified in the policy, with cancer, heart attacks and stroke accounting for the bulk of claims.

Income protection, also known as permanent health insurance, is more wide ranging. It pays a weekly or monthly income if you are unable to work for whatever reason. The income is taxable in the normal way, although you do get tax relief on the insurance premiums.

The trouble with critical illness cover is that the medical condition has to meet exactly with the definition in the small print before the policy pays out. This can result in absurd situations where claims are thrown out because the policyholder had the "wrong" type of heart attack or the "wrong" type of cancer.

"The term heart attack is a layman's term and claims cannot be paid on the basis on a layman's interpretation of what constitutes a heart attack, " says Finnegan. "For example, a severe attack of angina is not a heart attack.

To qualify for a claim, the underlying condition has to be medically and legally certified."

Another problem area is that policyholders may have to wait for their money, even after being diagnosed with a condition specified in the policy. For example, Parkinson's Disease is covered by most insurance companies, but some only pay out when the illness has progressed to the stage where the policyholder can no longer perform everyday tasks such as dressing or washing. This is a cruel restriction because it means there could be a gap of many years between the time that the sufferer can no longer work and the time the policy eventually pays out.

There are none of these ambiguities with income protection insurance because, once the policyholder is medically certified as unfit to continue working, the insurance should kick in.

But Finnegan says that for many people the cash in hand provided by critical illness insurance works out better than the monthly income paid by income protection. "By paying a lump sum up front, critical illness insurance gives you the freedom to pay off your mortgage, pay for the best care available or make any adaptations to allow your home accommodate your illness, " he says.

The important point is not to wait too long. "Critical illness is not something we like to think about but we all probably know somebody who had had to cope with these issues at an early stage in life, " says Finnegan. "Critical illness is an appropriate product no matter what your circumstances."