Critical illness vs income protection: they're not the same thing
People often ask me about 'protection insurance' as if it's one thing. It isn't. Critical illness cover and income protection are different products that solve different problems. Here's how to think about them.
Critical illness cover: what it does
Pays a tax-free lump sum if you are diagnosed with a qualifying serious illness — typically cancer, heart attack or stroke, though most policies cover 80+ conditions. You get the money whether or not you can work. There's no ongoing monthly payment. The insurer pays out once, and you decide what to do with it — clear the mortgage, pay for treatment, take time off.
Income protection: what it does
Pays a monthly income — typically 50–70% of your gross earnings — if you can't work due to illness or injury. It doesn't pay out on diagnosis; it pays out when you're actually off work. It can pay for months or years depending on the policy term. The important detail is the definition of 'incapacity'. Own-occupation policies (the best kind) pay if you can't do your specific job; any-occupation policies (cheaper, weaker) only pay if you can't do any job at all.
The key difference
Critical illness covers severity: you have a heart attack, here's a lump sum. Income protection covers duration: you can't work for six months, here's a monthly income. These are different risks. Someone with cancer might be treated in three months and back to work — a critical illness payout helps enormously. Someone with severe back problems might never qualify for a critical illness payout but might be off work for years — income protection would keep them solvent.
Which one do you need?
Ideally, both — but that's not always realistic. The priority depends on your situation. If you have significant debt (mortgage, loans) a critical illness lump sum can clear it immediately. If you're self-employed with no sick pay at all, income protection is often more urgent. If you have good sick pay from an employer for 6+ months, a longer deferred period income protection policy is cheaper. I'll work through the priority order with you on a call.
Self-employed people need to read this part
If you're self-employed, you have no employer sick pay. None. If you're ill for a month, you're not earning for a month. The NHS provides treatment; it doesn't replace your income. A well-structured income protection policy — own-occupation, with a short deferred period — is the one piece of cover I'd prioritise above almost anything else for self-employed people.
Not sure which protection you need — or whether you need both?
I'll look at your situation, your existing cover (if any), and give you a straight answer.
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