Income Protection vs Critical Illness Cover 2024

Request a Callback

By clicking on submit I / We give consent for you  to call me / us on the number provided to discuss my / our financial requirements.

Income Protection vs Critical Illness Cover 2024Income Protection vs Critical Illness Cover 2024

In an ideal world we would not be having an either or conversation over income protection and critical illness cover. Both of these policies can be incredibly useful if you become ill, so that you can face the future with financial support.


But there are times that people simply cannot afford to have both. I have gotten quite frustrated in the past when I have heard people say that if someone understands the value of these policies, they will take them out no matter the cost. In reality there are many people who simply do not have the spare funds for this kind of insurance.

Many people can see the value of income protection and critical illness cover, but sometimes they are not given top priority when it comes to the household budget. Now, I don’t want to be that person, but I am going to be that person. This kind of insurance is far more important than having Sky TV, having a fancy barista coffee each day, or those drinks with your mates on the weekend. Yes, these insurances are much more important than those things, but you also need to live life and enjoy yourself.

When we look at the cost of these insurances a lot of people tend to want to choose one rather than both. It’s about getting a balance of spending your money on things that you can enjoy right now, and insurance to help you if you need it.

So which do you choose? Income protection or critical illness cover?

What is income protection?

Income protection is a brilliant policy that pays out a monthly income to you if you are ill and unable to work. It’s full of technical jargon so here is a rundown of the key bits:

  • Monthly benefit – the amount you are insured for, usually based on up to 60-65% of your gross earnings
  • Policy Term – how long the policy lasts for, usually your anticipated retirement age
  • Deferred period – how long you wait from becoming ill and unable to work, before the insurer gives you financial support e.g. 4, 8, 13, 26, 52 weeks
  • Claim length – this is the amount of a time a successful claim can pay for, it’s usually all the way to the policy end date, 5 years, 2 years or 1 year per claim.
  • RPI linked – this means that the policy is going to increase each year to keeps it’s value compared to inflation increases

Income protection can be adapted in a lot of ways. I like to recommend that you go for the all singing and dancing version, then if the price doesn’t feel right you can tweak bits to make it suit your budget. 

An income protection policy will typically look like this:

  • An increasing income protection policy covering you for £1,650 per month to the age of 68, with a 13 week deferred period. A successful claim has the potential to pay for the full policy term.. 

You want to make sure that your deferred period doesn’t start before you finish receiving sick pay at work (ignoring statutory sick pay). If you get 4 weeks sick pay, you ideally want a 4 week deferred period. If you get 6 months sick pay, you ideally want a 6 month deferred period.

I’m really passionate about income protection because my dad has Parkinsons and had to retire from work early due to his health and he didn’t have income protection in place.  For him that meant he missed out on about 10 years worth of income if he had been able to retire at age 65 like he intended, which is not a small amount of money. Multiple your salary by 10 and see what you could miss out on.  To have continued receiving his income would have really helped him towards the costs of vising consultants and adapting his home for the future.

One last thing to be really conscious of with income protection is that these policies do not usually cover redundancy or loss of contracts. There are other insurance types that can insure you if you are made redundant. It is also not designed to cover state benefits.

What is critical illness cover?

Critical illness cover tends to be more popular than income protection. I think this is because critical illness cover specifically lists conditions that people can claim on, that are often the things that we worry about. Cancer, heart attack and stroke, are the main claimed upon conditions for this policy type. A lot of critical illness policies offer insurance on around 50-60 conditions. Do bear in mind that more critical illness’ covered does not mean that the policy is necessarily better!

With critical illness cover a claim can be considered if you are diagnosed with one of the listed conditions that the insurer offers cover for.

When it comes to choosing critical illness cover the options can often feel endless. At lot of insurers in the UK now have 4 options for critical illness cover and it can be quite intense choosing the right one. Ultimately, if you get a critical illness policy that covers you for cancer, heart attack, stroke and multiple sclerosis, then you are covering the main conditions that are claimed on with this policy type.

There is of course lots of jargon to know too! It’s insurance, there’s bound to be! Here’s a breakdown of some of the key things you need to know:

  • Sum assured – this is how much you are insured for, a very rough guide of 3-5x your annual salary is a good starting point
  • Policy term – this is how long the policy lasts for, ideally to your anticipated retirement age
  • Core Cover or Essentials Plan – this is the basic level of critical illness cover, you are insured for most of the key conditions that the insurer offers.
  • Enhanced or Select Critical Illness Cover – this is the all singing all dancing version, covering you for more conditions
  • Partial payments – this is where the insurer doesn’t pay the full sum of the insurance to you, but part of it because you’ve experienced a serious condition but not at the severity for a full pay out
  • Children’s cover – insurers potentially allow you to include critical illness cover for your children, so that if they do become critically ill you can have funds to take care of them and possibly take a leave of absence from work

A critical illness cover recommendation might look like this:

  • An increasing enhanced critical illness policy of £250,000 to age 68, with children’s cover included.

With critical illness cover it’s important to know that most insurers do change their policies every now and then, but, this change is not usually given to existing clients. So if you take out the insurance today you agree to the insurer’s critical illness contract as it is now. If they change the policy and add or remove conditions in the future, this will not usually be reflected in the insurance that you have.

Which is better?

Unfortunately there is no black and white answer to this. I personally feel that income protection is essential to most people that are working. I think critical illness is a policy that a lot of people are likely to claim on at some stage in their life. But the choice must come down to you and what you feel is going to put your mind at ease.

A quick summary:

  • Income protection – pays out if you are signed off sick by a qualified medical professional. Payouts are made monthly over a long period of time, if you are able to return to work the policy will stop paying and you will still be insured going forward.
  • Critical illness cover – pays out if you are diagnosed with one of a set number of conditions at a severity specified by the insurer. The payout is usually one large lump sum of money and the policy then ends.

Ultimately if you can afford, it is very useful to have income protection and critical illness cover. They do very different things. Your health, travel, occupation and sports can really influence whether income protection or critical illness cover has the greater value to you. Sometimes your circumstances might lead to premium increases or exclusions on one of the policy types, but then the other might be offered at standard terms. It really is a complex process to find the right income protection and critical illness policy for you, and our advisers do this day in and day out so that we can help people like you.

Our award winning advisers will help you chose the right income protection policy and critical illness cover to match you and your needs. You can rely on us to give you an open and honest recommendation on the best insurance for you and your family.

Related blogs

Client Reviews

Income Protection vs Critical Illness Cover 2024

Talk to a Friendly Adviser

Please feel free to call us on 0800 567 7450 and one of our qualified insurance advisers will be happy to assist you.

Get a Quote

Please feel free to request a quote from us using our online form. The more information that you can provide us about your health conditions, hobbies, travel and/or occupation, the more accurate indications of price we’ll be able to give you.

What We Offer?

  • Experienced and knowledgeable advisers
  • Specialist advice with no fees to pay
  • Full assistance with all of your paperwork
  • Put your policy into trust at no cost
  • A dedicated insurance adviser for you

Guides & News

Here’s our latest guides, musings, charity work, podcast, awards and industry updates. There’s a lot going on!

Our Recent Awards

Income Protection vs Critical Illness Cover 2024
Income Protection vs Critical Illness Cover 2024
Income Protection vs Critical Illness Cover 2024
Income Protection vs Critical Illness Cover 2024
Income Protection vs Critical Illness Cover 2024