Income Protection Insurance vs Critical Illness Cover

Being unable to work due to a long-term illness or injury with (in some cases) no clear timeline as to when you will be able to return is a worrying thought for all of us. But what if this thought became a reality? How would you be able to cope financially? How would you pay your mortgage and other outgoings?

With sound financial planning, you can protect against such risks using a range of insurance products designed to help in such circumstances where you are unable to work due to your health. In particular, income protection insurance and critical illness cover.

This article explores the key differences between income protection and critical illness whilst looking at how you can combine both types of cover together.

If you’d like to know more about how both income protection and critical illness cover could help protect you and your family, call us on 0808 189 0463 or make an enquiry and we will arrange for an advisor we work with to get in touch.

We'll match you with your perfect financial advisor

Save time and money with an expert who specialises in cases like yours

We'll match you with your perfect financial advisor

Save time & money with an expert who specialises in cases like yours.

What is the difference between income protection and critical illness cover?

The differences between critical illness cover and income protection insurance are a little more convoluted as both types of insurance have a number of crossover features.

Both critical illness and income protection are designed to provide financial assistance in the event of an unexpected illness or injury with no restrictions on what the proceeds can be used for.

However, there are a number of key differences between income protection and critical illness as outlined here:

  • How the money is paid out in the event of a claim
  • The amount of money paid in the event of a claim
  • Types of illnesses covered by each policy
  • The number of claims that can be made

How the money is paid out in the event of a claim

Critical illness cover

In the event of a claim critical illness cover pays a one-time, tax-free lump sum payment to the insured, which can be used for whatever purpose they require.

For example, lots of people link critical illness insurance to their mortgage so, in the event of a serious illness or condition, the largest household debt would be paid off.

Income protection

Income protection pays a regular monthly amount, based on the insured’s annual earnings. These payments can continue until you go back to work or, potentially, until you retire if your condition is so serious that you’re unable to work again.

Income protection insurance also usually has a deferred period before payments will commence, which can be anywhere from 1-12 months.

If, as part of your employment contract, you’re entitled to full pay for, say, three months, you can set the deferred period so your income protection payments start after this period. The longer the deferred period, the lower your insurance premiums will be.

The amount of money paid in the event of a claim

  • For critical illness cover the amount is simply the sum assured, whatever that may be, and it is paid as one lump sum.
  • The amount paid for income protection is a percentage of your usual monthly earnings. The total amount that can be paid will vary depending on the provider. Most insurers will offer a maximum of between 70% to 80% of your gross monthly earnings for income protection policies.

Types of illnesses covered by each policy

Critical illness insurance providers will have a list of illnesses and conditions that are covered under their policy. If you are diagnosed with an illness that is not covered, you will not be able to make a claim.

Income protection insurance generally offers a broader range of circumstances relating to illness where the insured will be able to make a claim. In essence, income protection covers most types of illnesses and conditions that would leave someone unable to work.

As an example, if you were involved in a car accident that left you unable to work for six months, you could make a claim on your income protection plan, whereas you could only make a claim on a critical illness plan if you sustained an injury which matched a condition within the policy (i.e. loss of a limb or blindness).

The number of claims that can be made

Critical illness insurance allows for a one-time claim to be made and once the sum assured has been paid, the policy cover expires. An income protection plan allows for multiple claims during the term of the policy.

If you’d like to find out more about the key differences between critical illness cover and income protection, get in touch and we can arrange for a specialist to discuss this further with you.


Is it possible to combine both types of cover?

Yes, this is possible, albeit as standalone policies. If you’re wanting to ensure that you have the most comprehensive cover to protect you and your family against the risk of death, critical illness or any condition that would leave you unable to work, then a combination of life and critical illness cover alongside an income protection plan may be the best solution.


Speak to an insurance expert

If you’re interested in both income protection insurance and critical illness cover and would like to speak with an expert in order to explore what options are available to you, call us today on 0808 189 0463 or make an enquiry here.

We'll match you with your perfect financial advisor

Save time and money with an expert who specialises in cases like yours

We'll match you with your perfect financial advisor

Save time & money with an expert who specialises in cases like yours.

We’ll match you with your perfect financial advisor – for free.