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Critical Illness Cover and Income Protection Insurance


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Do you struggle with the difference between critical illness cover and income protection? Are you also wondering which option is best for you? Trust me you are not alone. 

Welcome to PeeKay Finance, I’m Prim aka Pee Kay your insurance and finance expert, and every month I will be touching on the pulse of an essential topic. This is for your peace of mind via Insurance and better financial planning.


In this inaugural episode, I’m, going to deep dive into the difference between critical illness cover and how it links into or diverts from income protection


Now, I am positive you are new here, so make sure that you subscribe to this website right here so that you don’t miss any of my future value-packed episodes.

Obviously, am assuming that you want to see more finance-related content and resources in the near future, right?  

In that case, if any of the areas that I touch on in this article, you feel are something that you want to explore further and arrange for yourself, then be sure to get in touch. 

See, we deal with lots of insurance providers from AXA to Legal and General to name a few and we can help arrange cover and complimentary financial advice.


Alright, first things first:


What is Critical Illness Cover? 

Okay, critical illness cover is a lump sum of money that would be paid out directly to the insured person in the unfortunate event that they are diagnosed with a critical illness like a heart attack, stroke, cancer, etc.

While most policies do cover more than the above 3 conditions. Those, make up approximately 60 % of all critical illness claims. Otherwise, depending on your provider, policy terms, and conditions, some insurers cover a lot more than the three.

EXAMPLE: Let’s say you’re insured for £60,000 GBP. You’d get that £60k payout into your bank account, and the cover stops at that in most cases.

That’s why many people would use critical illness cover to pay off their mortgage. So if my mortgage were £150,000, I would take out one hundred fifty thousand pounds worth of critical illness cover. 

This is in the hope that if I were diagnosed with a critical illness, there’d be enough there to repay my mortgage, but obviously depending on how much the cover costs to do that.

The above strictly depends on if it’s affordable. Otherwise, people usually, as an alternative, look at perhaps paying off half of their mortgage.

If the cost of the cover is still unaffordable, then you might consider one year or a couple of years’ worth of your salary.

Understand that, how much cover you take out is dictated by you and the aim of it is to ease the financial burden if you were to find yourself in that situation.

Depending on your lifestyle, I appreciate that £ 60,000 may not be enough to cover your expenses and other bills. Yet, it would help ease the financial burden so that you can focus on your health.


In that case… 


What is Income Protection?

The way I like to think about income protection and how you too might look at it is: think about it as extended sick pay.

In other words, this cover pays out a residual income instead of a lump sum. And This is the difference between critical illness cover.

Also, it usually pays out for any illness. That means that if you’re unfit to work then you could make a claim, it’s not as restricted as critical illness cover, which will only pay you if you have a critical illness listed under your policy. 


My understanding thus is, most income protection policies will pay out for anything, e.g. a bad back, or even stress and anxiety. And you could also claim for some of the critical illnesses under your Income protection cover. 

EXAMPLE: If you get sick pay from your employer, that could be for say six months of sickness with doctor’s notes.

You wouldn’t need the income protection to cover you for the first six months. Meaning, you would have to wait and not claim on your policy for six months. Then beyond that point, you would have your Income protection cover start to payout if you time your claim right.

Let’s say you can have the cover payout for say 1 year, 5 years, or even right up to retirement. 

Clearly, some income protection policies are a very long-term solution and if you had a condition that meant you could never go back to work, then you don’t have to worry about money right up until your retirement age.


So, based on the above 2 breakdowns, which one of the two policies do you need? 

Funny thing is, a lot of people say to me: if I’ve got critical illness cover, then why do I need income protection and vice-versa?

My response is: these two types of cover complement each other.

But let’s dive deeper…


Critical Illness and Income Protection Covers Comparison

As said above, they do not contradict each other.

What I mean by that is: let’s say that you have the critical illness protection to pay off your mortgage. You get a critical illness…your mortgage is paid off. 

Obviously, for most people, our mortgages aren’t the only outgoings that we have.

In many cases you still have;

  • Utility bills
  • Council Tax
  • Groceries bill
  • House repairs and maintenance etc. 

And that’s where having income protection alongside critical illness cover would make sense.  Because then, your income protection, would then cover your day-to-day expenses and bills.

Now let’s say that you had income protection cover, but no critical illness.

EXAMPLE: Let’s say that you had a car accident and got a disability as a result, a physical disability.

If you had income protection and no critical illness, then yes, your bills and monthly expenses would be covered. But it might mean that, as a result of your disability, you have to adapt your home for better mobility.

It could be difficult for you to purchase the necessary equipment. If you didn’t have a lump sum by way of say; critical illness cover. So, the two policies complement each other.

Critical illness cover is Worth_it

Critical Illness Cover – Is it worth it? 

So just to recap, in an ideal world, having both would help you cover different areas of your financial needs where you’d need it most.

More so, if you have very little or no sick pay benefits at all. For instance, if you’re self-employed or your employer only pay statutory sick pay, then I would say: income protection is really important.

In fact, in that scenario, I’d say it would be more desirable to have both types of cover.

I appreciate that it comes down to affordability for most people. So you might have to choose and prioritize one of the two areas and that choice really depends on your own individual circumstances as to which one might take priority.


Whether income, protection or critical illness takes priority is up to you. But to help you make a decision look at the following: 

  • Do you know what sick pay benefits your employer offers?
  • Your Age and Health e.g. do you smoke? 
  • What type of job do you do? This also helps you to determine which one is going to work best for you.
  • So how much will the cover cost?  
  • How much do you want to pay for the cover?
  • All of these factors will go into determining how much the cover will cost you.

Another quick example: Let’s assume you are 30 years old, with an annual income of £45,000 and you’re, looking to retire at the age of 65. That’s another 35 years of working life.

So your income over those 35 years is going to be a total of £1,575,000 before tax!

If something were to happen to you to jeopardize your income, where, how are you going to find that kind of money?

If you’re going to struggle to find that kind of money, then these things are really well worth considering now. 

As with any type of insurance, it’s, really important that you seek specialist advice. Because of how much cover you need, the type of cover that you need will largely depend on your own individual circumstances.

What’s right for one person may not be right for the next. So make sure that you get in touch.

If any of the points that I’ve touched on are of interest to you, you want to explore them further, do reach out so you can sleep easy.


We at Pee Kay Finance, are also experts with advising and arranging insurance, and we don’t charge, any fees for our insurance advice either. So if you are new here and you’ve enjoyed this episode do share this with a loved one. Share on Social Media and leave a comment below. 



Pee Kay aka Primrose is an FCA Regulated Financial Advisor and Protection Specialist who helps families protect against life’s biggest financial risks. With tailored advice based on individual needs and circumstances to find the best solutions for you. Book a Chat Today



If you enjoyed our Critical Illness Cover Examples and Income protection breakdown, do say so below and feel free to connect. Thanks for stopping by.


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