Income Protection Insurance Vs Critical Illness Cover: Which Is The Best Option For You?

When it comes to financial security, there are a wide variety of products on the market that can offer financial protection under a number of circumstances. However, choosing which one is the best option for you can be challenging to say the least.

In this blog, we will cover everything that you need to know about income protection insurance and critical illness cover so that by the end, you can make your own mind up about which one is right for you.

Income protection insurance

Firstly, let’s define what income protection insurance is. Income protection provides you and your family financial support if you are unable to work due to an illness or injury. This is usually a percentage of your salary and can be paid up until retirement age, but will usually stop once you are able to return to work.

You can make multiple claims for a vast array of illnesses and injuries that prevent you from working, which is not possible with critical illness cover. The cost of an income protection will depend on factors like:

• Age
• Type of job
• Medical history
• Percentage of income covered
• Length of cover

It is typically noted that the riskier a job is, the higher your premium could be. So, it’s important to check whether your employer already offers a type of income protection insurance. You may find that some employers offer group income protection insurance which is something to consider.

Critical illness cover

Meanwhile, critical illness cover provides a lump sum payment that is paid out if you become critically ill or diagnosed with a potentially life-threatening condition. The conditions that are eligible for a claim can differ from provider to provider, so it is important that you research a policy’s terms and conditions thoroughly.

If you die, however, it won’t pay out. It’s only paid out once after which your critical illness cover will then end. Factors that can affect the price of a critical illness cover policy include:

• Age
• Length of cover
• Amount of cover
• Medical history
• Lifestyle
• Occupation

Which one is best for you

In the UK, it was discovered that less than 1 in 10 adults have either critical illness cover or income protection, showing how UK adults don’t seem to find either important enough to have.

On the other hand, if you are looking to secure your financial situation should you become ill or injured and thus unable to continue working, taking out an income protection policy or critical illness cover can truly be the helping hand during that time.

It’s worth noting that both payouts are tax-free, but you might find that critical illness cover may be potentially more expensive compared to income protection insurance as the latter can be tailored to suit your needs. However, you may also end up receiving a smaller amount if successful with an income protection claim than with a critical illness cover claim.

It is recommended that you speak with a financial advisor or insurance expert before finalising your decision to ensure that you are picking what is best for you according to your needs and preferences.