What’s the difference between income protection and critical illness insurance?

How would you support your family if you were off work due to an illness or injury? Income protection and critical illness cover offers financial security and peace of mind for you and your family. Income protection provides you with a tax-free level of income, while critical illness cover pays out a tax-free lump sum. In this blog, we explain the difference between income protection and critical illness insurance, so you can choose the right policy for you.

How does income protection work?

An income protection policy pays you a monthly income, usually around 60% of your salary, to help you cover your mortgage and household bills. This insurance income normally continues until you are well enough to return to work, retire, or reach the end of your policy.

Income protection is useful for covering ongoing living expenses, providing a valuable financial buffer if you have low savings. It’s also helpful for the self-employed who cannot access employer-based sick pay.

Many people take out this type of insurance to make sure the cost of their mortgage continues to be covered if they are unable to work. Relying on Statutory Sick Pay can be risky as it’s often not enough to cover household costs and it stops after 28 weeks.

Income protection usually pays out in relation to any injury or illness, while critical illness cover only pays out a lump sum for specific conditions. For more information, see our Income Protection page.

What is critical illness insurance?

Critical illness cover pays out a lump sum benefit in relation to a specified illness covered under the policy. Instead of a monthly income, you would receive a lump sum, which can be used to pay for medical costs, mortgage payments and household bills. A critical illness insurance policy can be useful for larger, one-off costs when facing a serious illness.

If you’re largely reliant on your income to support your family, critical illness insurance can be a useful financial safety net. It can help to cover any shortfalls in state benefits or employer’s sick pay, especially if you don’t have enough savings to cover your costs.

The qualifying illnesses will vary depending on the critical illness policy. Typically, serious conditions such as cancer, stroke, heart attack or failure, organ transplants, Parkinson’s disease and multiple sclerosis are covered. Make sure the serious illnesses you expect to be covered are included within your chosen policy. For more information, see our Critical Illness Cover page.

Get an income protection or critical illness insurance quote

It can be confusing trying to decide on the right insurance policy for your home and family. At Warwickshire Mortgages, we are here to answer your insurance queries. We’ll check your existing policies to make sure you have an adequate level of cover in place.

Income protection can be tailored to your circumstances, and we can also advise you on conditions listed under a critical illness policy. We’ll talk you through the different types of cover and terms and conditions, so you have a clear understanding of the differences.

Need help choosing the right insurance policy? Book a free consultation with our advisers.