Critical Illness Cover vs Income Protection Insurance

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Introduction

What is Critical Illness Cover?

How Does Income Protection Insurance Work?

Policy Length, Payout Timing, and Cost

Which Cover is Right for You?

When thinking about financial security, two types of protection often come up: critical illness cover and income protection insurance.

Both offer financial support if your health affects your ability to work, but they function in different ways. The right choice depends on your personal situation, lifestyle, and what you need the cover to provide.

What is Critical Illness Cover?

Critical illness cover provides a lump sum payment if you are diagnosed with a serious medical condition listed in the policy.

This typically includes conditions such as cancer, heart attacks, and strokes, though the exact list varies between insurers.

The payout can be used however you need, whether that is to cover mortgage payments, medical treatment, or household expenses.

Once the payout is made, the policy ends. There is no ongoing financial support, but the lump sum can help ease financial pressure during a difficult time.

This type of cover is particularly useful if you need a one-off payment to manage immediate costs after a diagnosis.

How Does Income Protection Insurance Work?

Income protection insurance replaces a portion of your earnings if you are unable to work due to illness or injury.

Instead of a single lump sum, it provides regular payouts, which continue until you recover, reach the policy’s end date, or retire, depending on the policy terms.

This type of cover can be particularly beneficial if you have ongoing financial commitments such as mortgage payments, household bills, or family expenses.

Unlike critical illness cover, which only applies to specific conditions, income protection can cover a broader range of illnesses and injuries that prevent you from working.

Payments usually start after a waiting period, which can range from a few weeks to several months depending on the policy.

Policy Length, Payout Timing, and Cost

One of the main differences between these policies is how and when payments are made.

Critical illness cover pays out as soon as a claim is approved, whereas income protection insurance has a deferral period before payments begin.

This waiting period is something to consider, as it affects how soon you would receive financial support. The cost of each policy can also vary.

Income protection insurance often has higher premiums as it provides continuous payments, whereas critical illness cover is typically more affordable as it offers a one-time payout.

The best choice depends on whether you prefer a lump sum to help with immediate expenses or a steady income if you are unable to work.

Which Cover is Right for You?

Both policies offer valuable support but serve different needs. If you are concerned about covering large expenses after a diagnosis, critical illness cover might be the right choice.

If maintaining financial stability over time is more important, income protection insurance could be a better fit. Some people choose both to ensure they have full financial protection in place.

If you are unsure which option suits you best, our mortgage and protection advisors at UK Moneyman can discuss your circumstances and help you find the right cover for your situation.