How would you keep a roof over your head if you couldn't work due to ill health? Many of us wrongly adopt the "it-will-never-happen-to-me" mentality, but for millions of households, putting your head in the sand could have dreadful consequences. Recent research from Shelter showed that nearly four million families could not keep up with housing costs in the event of a month's missed pay.

"There is little or no room for manoeuvre for people with stretched household budgets," says Gillian Guy, chief executive at Citizens Advice. "Many are still feeling the effects of the recession as low wages and high costs mean people face a daily battle to make ends meet. A month without a pay cheque can easily prove disastrous."

So how can you ensure you are properly protected should you find yourself out of work due to an accident or sickness? It is worth considering insurance such as income protection or critical illness cover. These policies can pay vital bills in the event of prolonged periods unemployment due to poor health.

According to figures from the Institute of Actuaries and insurer LV, a 30-year-old, non-smoking man is nearly twice as likely to suffer a serious illness before the age of 70 than to die. Yet despite this, just one in 10 of us have this type of financial protection in place. "Anyone with debts or dependents should consider some form of financial protection insurance," says Tom Baigrie, chief executive of Lifesearch, the insurance brokers. "For many people affording both types of cover would be difficult, however, the products do complement each other as they cover different risks."

Critical illness cover pays a tax-free lump sum on diagnosis of any one of a list of serious illnesses, while an income protection policy pays a monthly income if you are unable to work through sickness. "It's really important to think about why you might be unable to work for an extended period of time," says Phil Jeynes, spokesman for insurance provider PruProtect. "Statistically, injury or illness are the biggest causes of absenteeism and many employers stop paying sick pay after quite a short period of time."

Most people dramatically overestimate the amount of state aid they will receive if they are taken ill. According to Lifesearch, a 30-year-old earning a salary of £35,000 would only be entitled to around £300 a month in benefits if they were to become too ill to work. However, an income protection policy from Exeter Friendly, costing £15 a month, would guarantee a monthly income of £1,400 if the person buying it opted for payouts to begin after a six-month deferral period.

When you consider figures from Aviva that show that the average length of an income protection claim is nine years and four months the sum can soon add up. Based on the Exeter Friendly policy above, this cover could be worth nearly £150,000 over the course of your claim.

Policies are priced according to your age, general health and the amount you want to receive if you have to make a claim. When calculating how much cover you need, it makes financial sense to consider all the monthly outgoings you pay every month. "As well as your mortgage, rent or loan commitments, you must include those everyday essentials such as council tax, utility bills and the weekly food shop," says Simon Burgess, director at protection provider British Money. "If you only take out enough cover to repay a loan or mortgage, you could still end up in debt trying to meet your other commitments."

Financial experts agree that due to society's increasing life expectancy, it is crucial to think past traditional retirement ages when taking out a protection policy to ensure that you will be adequately covered for the duration you require.

"Given that we may all need to work much longer to be able to afford to retire, one must think beyond age 65 as a maximum term," says wealth manager Philippa Gee. "You still need to consider just how long your working life could be and scope a product to reflect that." Bear in mind, however, that this could increase the cost of the policy, depending on the length of cover you are after.

While these policies complement each other, they do different things and cover different risks so it is important to carefully consider both before making a purchase. If you have a heart attack, for instance, and return to work after six months, a critical illness policy would have paid the lump sum, where income protection payments would stop when you go back to work.

When it comes to taking out insurance, policyholders must be careful to disclose all previous medical conditions. Failure to report even minor conditions, tests or even a complaint made to a GP could potentially invalidate a later claim, or result in a reduced payout.

When it comes to choosing an income protection policy, consumers should look to insure their "own occupation" – claimants who are unable to do their own job – rather than any work at all because they fall ill. The good news is that this type of cover, while offering better protection, may not be more costly as it is factors such as age, smoking, occupation, length of policy and amount of cover that determines the premium.

Get the most for your premiums and opt for two single policies rather than joint cover if you are in a relationship. Despite higher premiums of roughly 10%, these two policies can pay out twice, whereas a joint policy will only ever pay out once.