August 28th, 2020

Income Protection or Critical Illness? Your complete guide

If you’ve ever thought about protecting you and your family if you’re unable to work, you’ve probably come across Income Protection and Critical Illness Cover. Since they appear similar, it can be difficult to see the difference between the two types of cover, although the latter outsells the former by about five to one.

So, which is the better type of protection to put in place? Well, it’s not quite that simple, so read on to find out the difference between the two, and how they can provide you with financial peace of mind.

Income Protection explained

If you’re the primary or sole earner in your household, losing your income can be devastating, – especially if you have dependants.

Income Protection can help you if you have to take time off work due to injury or illness. It usually pays you a monthly sum until you can return to work or until the end of your protection period.

For example, if you fall sick or you’re involved in an accident, Income Protection is designed to pay a portion of your salary whilst you recover.

Typically, your protection will pay out after an ‘excess’ period. This is the time that you have to be off work for it to kick in. Usually, the longer the excess period, the cheaper the cost of the premiums.

For example, a four-week excess period means that you would begin receiving a payment after you had been off work for four weeks. Income Protection with a 12-week excess period is likely to be cheaper, but you’d have to be off work for more than 12 weeks before the payments would begin.

Many people choose an excess period that ties in with the sick pay they would receive from their employer. For example, if you received full pay from your employer for eight weeks, you might want your Income Protection to kick in after eight weeks.,

The cost of the premiums is determined by factors like:

  • Your age
  • How risky your work is
  • Your medical record
  • How much income you want to cover
  • How soon you want the cover to kick in.

Most Income Protection plans don’t cover every illness, and you may not be covered for pre-existing conditions. It also doesn’t cover you if you are made redundant.

Income Protection can be particularly useful if you don’t have the means to support your family whilst off work. This is especially true if you’re self-employed and wouldn’t be able to earn anything during a period of recovery.

Critical Illness Cover explained

Whilst Income Protection can help if you need to take time off work to recover, Critical Illness Cover can give you peace of mind if you are diagnosed with a serious illness.

Critical Illness Cover will pay you a cash lump sum if you’re diagnosed with, or need treatment for, anything contained within a list of serious illnesses. These illnesses vary from insurer to insurer, but typically cover serious cancers, heart attacks, strokes, and multiple sclerosis as well as a range of other conditions.

Data from Aviva showed that in 2018 cancer was the most common reason for claiming on a Critical Illness policy, resulting in 61.4% of claims. This was followed by heart attacks at 10.6% and stroke at 7%.

If you are diagnosed with an illness such as cancer, the last thing you need is to be worrying about your financial wellbeing whilst focusing on your recovery.

Since this cover provides a lump sum, it can be used to pay off a mortgage or debts, redesign your home to make it more disability-friendly, or pay for private treatment.

Serious illnesses can affect anyone at any age, so Critical Illness Cover might be more useful to have than you think. Over 367,000 people are diagnosed with cancer each year in the UK – a new diagnosis every two minutes.

Income Protection and Critical Illness Cover compared

Both Income Protection and Critical Illness Cover can provide you with peace of mind if the unthinkable should happen. However, a common mistake people often make is to think that they only need one or the other.

When you compare the two, it becomes obvious that the two are complementary, not mutually exclusive.

  Income Protection Critical Illness Cover
How will I be paid? Will pay you a monthly sum after an excess period. Will pay you a tax-free lump sum on diagnosis.
When does it take effect? When you’re unable to work due to illness or injury, it will cover a portion of your income. When you’re diagnosed with an illness covered by your insurer.
How does it work? The insurance will pay you a monthly sum until you are well enough to return to work or until the maximum term of cover. Your insurer will pay you a lump sum after you’ve provided evidence of your diagnosis.
What is it useful for? Income Protection helps you pay your bills until you’re able to start earning again. Critical Illness Cover gives you an injection of cash when you’ve been diagnosed with a serious illness.

Income Protection is useful for protecting you from the effects of short-term illness or injury, whilst Critical Illness Cover can give you financial security during your recovery from a serious illness.

Although the two plans cover different things, both give you peace of mind if you need financial support.

Get in touch

If you’d like to know more about which type of protection could be suitable for you, we are here to help. Email us at or click here to request a call back from one of our advisers.

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