Granny smith apples and oranges in the crates for sale at a market stall, Rome, Rome Province, Lazio, Italy

Which is better Income Protection or Critical Illness Cover?

It’s a bit like comparing apples and oranges really. The term critical illness sounds horrendous and conveys an impression of fear and worry. However, the term Income Protection sounds somewhat less in title and no one really thinks that they will be ill enough not to return to work after a couple of weeks. And if they are that ill, they will have a ‘critical illness’.

What they do

Income Protection – In brief, this policy pays out a monthly benefit if you cannot work due to illness or injury. The benefit can be used to help pay monthly bills, replace income and/or cover mortgage payments.  It pays out until you are able to return back to work or until you retire.

Pays out a monthly income if you are too ill to do your job.

Critical Illness – Critical Illness Insurance policies pay out a lump sum if you become critically ill. (and the condition is covered by your critical illness policy) The lump sum payout could be used to repay the mortgage, settle debts or pay for medical expenses. All Critical Illness policies cover three core conditions: cancer, heart attacks and strokes. The critical illness conditions that you will be covered for will vary from Insurer to insurer.

Pays out a lump sum if you suffer a specified critical illness that is on the insurers’ list of conditions.

heart IP and CIC jigsaw

It’s OK the State will Support Me?

The average weekly salary in the UK is £550.00*. With just £73.10** per week in benefits, you would fall short by £365.90 a week.

*Office of Nation Statistics
**Gov. uk, 2018

Worrying Statistics

  • Without income, the average UK employee has enough savings to last only 32 days. (source Legal and General 2018)
  • 40% of employees do not have any contractual sick pay written into their employment contract. ( source Cirencester Friendly)
  • 74% of renters don’t have a plan in place to cover rent payments if they became too ill to earn for three months or more.
  • Less than 1 in 3 don’t know how long they could survive financially if they stopped working.

Source: Survey of 2098 UK adults, YouGov, August 2017

It won’t happen to me?

When it comes to planning for your future, it is easy to believe that illness or accident won’t happen to you. Many people feel fit and healthy and believe that it is a safe bet to choose Critical Illness cover over Income protection and save themselves from paying another monthly premium.

But, did you know that the following list of illnesses and conditions is not covered by Critical illness insurance?  And yet listed are some of the most common illnesses that create debilitating pain or mental anguish. Which, can go on for weeks before symptoms ease or you get better enough to return back to work.

  • Shingles
  • Fibromyalgia
  • Endometriosis
  • Broken bones
  • Frozen shoulder
  • Slipped disc
  • Mild Depression/anxiety
  • Arthritis
  • Kidney stones
  • Gall stones
  • Sciatica
  • Stomach ulcers
  • Acute pancreatitis
  • Pregnancy-related complications

Total and Permanent Disability  A typical TPD description: If a person becomes totally and permanently incapacitated their claim will be paid. This definition can cover any condition which results in total and permanent disability. Permanent is defined as “expected to last throughout the insured person’s life with no prospect of improvement, irrespective of when the cover ends or the insured person retires”. TPD definitions vary between insurers speak to your adviser for full details.

Did you know that some real-life income Protection claims* actually range from:

  • Skin Disorders – Eczema and Psoriasis
  • Ears/Eyes – Tinnitus, Labyrinthitis, Vertigo, Detached Retina
  • Wisdom Teeth Removal
  • Hernia
  • RSI
  • Severe Migraines

The important message to take away from this feature is how the policies differ and why they complement each other. 

Claims figures released by the Association of British Insurers (ABI)

Show that the insurance industry paid out a record £5 billion in protection claims in 2017 – representing an increase of more than £340 million year-on-year.

Protection insurers paid out a record-breaking £5 billion in claims in 2018.

Please note that any premiums mentioned are indicative only and based on this specific case study/ example, which is shown for information purposes only. Your own circumstances will determine whether the amount payable is more or less than the figure quoted.

*Sourced from Cirencester Friendly 2018 with thanks