Income Protection or Critical Illness Insurance?

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Deciding how to protect your family, finances and lifestyle from the risk of sickness or injury can be a difficult decision. After all, there are a number of different policies to choose from – how do you know which one is right for you?

The two main ways to protect yourself against the risk of illness and injury are Income Protection and Critical Illness Insurance.

More people tend to have heard of Critical Illness Insurance and it therefore generally has a wider uptake, especially given that it’s often sold alongside mortgages to protect outstanding home loans.

However, Income Protection could potentially be a more valuable protection product for many working adults – it’s just that it’s less well known and therefore less well understood by clients and even some advisers alike.

We don’t have a hierarchy of needs in protection insurance and while we don’t products may be sold without the main focus being on customer need.

Critical Illness Cover does a very important job but I believe Income Protection should outsell it by a significant margin.

Peter Le Beau, MBE
Chairman of The Protection Review and Income Protection Task Force

Quick Video Guide To Critical Illness Cover Vs Income Protection

Don’t have time to read the below, but want a quick, expert explanation of these two products? Our very own Alex Weir, gives us the lowdown. Just press play 👇

What Is Income Protection?

Income Protection – also known as Accident and Sickness Cover – is an insurance that replaces lost income while you’re off work sick.

The illness or injury that keeps you from working could be anything; as long as it keeps you from doing your job role, you’ll be able to claim.

After a chosen ‘waiting period’, known as the deferred period, the policy kicks in to pay out a regular, tax-free monthly income equivalent to up to 70% of your gross (pre-tax) earnings.

This allows you to keep up with essential living expenses and focus on your recovery rather than worrying about where the cash will come from to pay your next set of bills.

The best Income Protection pays out long-term, so if you’re so ill or injured you can never work again you’ll receive a monthly income all the way up until retirement.

On such long-term policies, it’s possible to claim as many times as you need to for as long as you need to over the life of the policy, right up until the age you’ve chosen for your policy to end.

The major claims on Income Protection are for musculoskeletal issues (e.g. bad backs) and mental health problems.

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What Is Critical Illness Insurance?

Critical Illness Insurance pays out a tax-free lump sum if you’re diagnosed as critically ill.

You must be critically ill as per the insurer’s list of definitions of serious illnesses in their policy terms and conditions to make a successful claim.

This means the number of conditions is limited by design and the illness or injury keeping you from working needs to be ‘critical’ if you’re to receive a payout.

The biggest three claims on these policies are for:

  • Cancers
  • Heart attacks
  • Strokes

There’s no deferral period during which you must wait before you can receive a payout; a claim can be made as soon as you have diagnosis of your critical illness.

The policy will only pay out once if you suffer an illness that triggers 100% of the payout – after this, you’ll be left without any cover.

The policy is not tied to your earnings and you can insure however much you like. In this respect, it is similar to life insurance except that the plan pays out based on illness or injury rather than death.

Critical Illness Insurance is often used to cover a mortgage, where a payout is needed once to clear the mortgage on diagnosis of a critical condition.

sam barr-worsfold independent protection expert at drewberry

While most Critical Illness policies cover around 40 conditions, some cover more than 100 and others cover fewer than 10, so read the terms and conditions carefully.

Also, check the definitions of the illnesses as well as the number covered – you want robust definitions to improve your chances of making a successful claim.

Sam Barr-Worsfold
Independent Protection Expert at Drewberry

At Drewberry we have access to a specialist Critical Illness tool designed to rank Critical Illness propositions from across the entire UK market to examine which will be most likely to pay out for an individual just like you.

Difference Between Critical Illness Cover and Income Protection

Income Protection

Critical Illness Insurance

The Basics

Pays out a monthly benefit if you have to take time off work due to any illness or injury that prevents you from working.

Pays out a single lump sum if you were to suffer a critical illness as defined by the policy’s terms.

What Does It Cover?

When the ‘Own Occupation’ definition of incapacity is used the policy can pay out for any medical condition that prevents you from doing your specific job.

Many policies do not have any standard exclusions aside from pre-existing conditions. Even where you do have pre-existing conditions, these can sometimes be included after years spent on the policy without receiving any advice, medication or treatment for that condition.

Depending on the insurer, policies typically cover around 40 specified illnesses and injuries.

It is important to note that some insurers will assess the severity of the condition in line with their terms before making a payout. So a relatively minor incidence of cancer, for instance, where the tumour is low grade and in situ, may not be included if caught early.

How Does It Work?

The policy starts paying out a monthly benefit after your chosen deferred period and will continue paying out either until you are well enough to return to work or you reach the end of the policy life, which is usually set in line with your expected retirement age.

Upon the insurer receiving satisfactory evidence that one of the critical illness conditions specified in the policy terms has been diagnosed the insurer will payout the lump sum assured under the policy.

What Does It Protect?

Often used to protect general income so the policyholder can keep up with their essential monthly outgoings during a period of incapacity. It is sometimes used specifically to cover monthly mortgage loan repayments.

Often used to cover the amount outstanding on a mortgage loan so the debt can be repaid should the policyholder suffer a critical illness. It is also used as a source of funds to make home modifications should you suffer from a disability.

What Are The Biggest Claims?

Income Protection Claims

Below is a chart compiled from The Exeter’s 2017 claims statistics for Income Protection.

As you can see, nearly half of claims are made up of musculoskeletal issues and back pain, with a further 7% made up of mental health problems.

Neither of these are deemed ‘critical’ as defined by a Critical Illness Insurance provider yet can be nonetheless debilitating and clearly result in many successful Income Protection claims each year.

Critical Illness Insurance Claims

Cancer claims make up the vast majority of all Critical Illness claims according to Aviva’s 2017 claims data.

This is followed by strokes and heart attacks; between them, these ‘big three’ claims account for more than 4 in 5 critical illness claims.

Need Critical Illness & Income Protection Advice?

While every client is different and everyone has different needs and circumstances that make it hard to know what’s best for them, in the vast majority of situations Drewberry tends to recommend an ‘own occupation’ Income Protection policy over Critical Illness Insurance.

Own occupation Income Protection Insurance will pay out a monthly benefit if you can’t do your specific job role.

We tend to recommend this because there are a number of limitations on Critical Illness Insurance policies, such as:

  • Critical Illness Cover only pays out once
    Whereas Income Protection can offer regular monthly payouts until retirement if necessary, Critical Illness Insurance will only pay out once and then end. This may be sufficient to pay off a mortgage but could leave you with no funds to live on afterwards. Even where there is money left over after repaying the mortgage, it may not last long enough if you’re off work long-term.
  • Income Protection offers regular monthly payouts
    This can make your finances easier to manage while you’re sick, replicating the monthly income you’d be receiving from your employer while you’re unwell.
  • Critical Illness Insurance only covers ‘critical’ conditions
    By its very nature, Critical Illness Cover only protects against serious conditions (e.g. cancer, heart attacks and strokes). This is great if you suffer from such an illness but doesn’t provide protection if you were to suffer from a less serious illness, such as a bad back, which can nonetheless be debilitating.
  • Income Protection often works out cheaper
    As you’re insuring a large, one-off lump sum payment with Critical Illness Insurance, premiums can be quite high, especially for older people or those looking to run the policy to an older age. With Income Protection, where the policy is designed to pay an income until you’re recovered rather than one large lump sum, insurers tend to be able to offer more competitive rates.

Which Policy Makes the Most Sense?

In terms of the scope of cover, when the ‘own occupation’ definition of incapacity is used, Income Protection provides a far more comprehensive level of cover as it does not restrict what types of conditions can be claimed for, just as long as it prevents you from working.

The simple fact is that financial risk comes from your inability to work and Critical Illness Cover leaves far too many medical scenarios uncovered.

Why Speak to Us…

We started Drewberry because we were tired of being treated like a number and not getting the service we all deserve when it comes to things as important as protecting our health and our finances. Below are just a few reasons why it makes sense to let us help.

  • There is no fee for our service
  • We are independent and impartial
    Drewberry isn’t tied to any insurance company, so we can provide completely impartial advice to make sure you get the most appropriate policy based solely on your needs.
  • We’ve got bargaining power on our side
    This allows us to negotiate better premiums for you than you going direct yourself.
  • You’ll speak to a dedicated expert from start to finish
    You will speak to a named expert with a direct telephone and email. No more automated machines and no more being sent from pillar to post – you’ll have someone to speak to who knows you.
  • Benefit from our 5-star service
    We pride ourselves on providing a 5-star service, as can be seen from our 3782 and growing independent client reviews rating us at 4.92 / 5.
  • Gain the protection of regulated advice
    You are protected. Where we provide a regulated advice service we are responsible for the policy we set-up for you. Doing it yourself or going direct to an insurer won’t provide this protection, so you won’t benefit from these securities.
  • Claims support when you need it the most
    You have support should you need to make a claim. The most important thing when it comes to insurance is that claims are paid and quickly. We are here to support you during the claims process and make sure it’s as smooth and stress free as possible.
Tom Conner Director at Drewberry

Although it is important to understand the risks each individual client faces, for the vast majority of working adults the first protection policy we consider is Income Protection.

If you need any help please do no hesitate to pop us a call on 02084327333 or email

Tom Conner
Director at Drewberry

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If you are unhappy with our service, we have a complaints procedure, details of which are available upon request. If you are unhappy with how your complaint has been dealt with, you may be able to refer your complaint to the Financial Ombudsman Service (FOS). The FOS website is

Drewberry Ltd is registered in England and Wales. Companies House No. 06675912

Drewberry Ltd registered office: Telecom House, Preston Road, Brighton, England, BN1 6AF. Telephone 0208 432 7333

Drewberry Ltd (Financial Conduct Authority No. 505473) is an Appointed Representative of Quilter Wealth Limited and Quilter Mortgage Planning

Limited, which are authorised and regulated by the Financial Conduct Authority.


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