Drewberry™ provide pensions, investment and insurance advice for Money to the Masses readers throughout the UK.


Income Protection or Critical Illness Insurance?

Deciding how to protect your 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.

It really should be noted that there are significant differences between the cover provided by each policy type so it is well worth looking into which policy best fits your specific situation.

Which?, the consumer protection group assert that only about 50% of people off work for 6 months or more due to accident or sickness would receive a payout from a critical illness policy(1).

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Income Protection Summary

This type of policy covers your earnings from the risk of sickness or injury. The policy would payout a monthly benefit of up to 65 per cent of your gross income if you were unable to work.

It is a long-term plan providing protection all the way up until you retire and multiple claims can be made throughout the life of the policy.
One of the great advantages of income protection insurance is that it covers you for practically any illness or injury that prevents you from working.

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

“It is good to see yet more very interesting Drewberry research. I think it highlights the fact that 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 does a very important job but I believe Income Protection should outsell it by a significant margin.”


Critical Illness Cover Summary

Critical illness insurance pays out a lump-sum if you were to suffer a ‘critical illness condition’ (which is a serious illness or injury that is specified in your policy document).

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. The main reasons for claiming on a critical illness plan include cancer, stroke and heart attack.


“Most critical illness providers will cover the same conditions, however, it is always worth reviewing the list of illnesses covered by each insurer and the severity to which they will consider a claim. Some are certainly better then others.”

Oliver Evans
Independent Protection Expert at Drewberry Insurance

Key Similarities

  • Both policy types provide financial cover for illness or injury;
  • The payout can be used for whatever purpose the policyholder decides;
  • Both policies can come with guaranteed / fixed premiums.

Key Differences

  • Income protection pays out a monthly benefit whereas critical illness cover pays out a lump-sum benefit;
  • Critical illness covers specific illnesses and injuries whereas income protection can cover practically any medical condition that prevents you from working;
  • It is possible to make multiple claims on an income protection plan whereas critical illness pays out once and then the policy terminates;
  • Income protection is tied to earnings whereas critical illness cover is not;
  • Any amount can be insured with critical illness whereas income protection limits cover to 65 per cent of gross (pre-tax) earnings;
  • Critical illness cover can be taken out with life insurance and as a joint policy with your partner whereas income protection is an individual plan.
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Difference between Critical Illness Cover and Income Protection

What is it?

Income Protection

Pays out a monthly benefit if you have to take time off work due to illness or injury.

Critical Illness Cover

Pays out a lump-sum amount if you were to suffer a specified ‘critical illness condition’.


What does the policy cover?

Income Protection

When the ‘Own Occupation’ definition of incapacity is used the policy can payout for any medical condition that prevents you from doing your specific job. Many policies do not have any standard exclusions.

Critical Illness Cover

Depending on the insurer, policies typically cover anywhere from 30 to 50 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.


Common Reasons for claiming on the plan

 Common Income Protection Claims LV (2011)   Common Critical Ilness Claims LV (2011)

How does it work?

Income Protection

The policy would start 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.

Critical Illness Cover

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, provided this happens during the policy term.


What is the policy used to protect?

Income Protection

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.

Critical Illness Cover

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 a disability be suffered.


The Drewberry Verdict

Critical Illness Cover

As only about 50% of people off work for 6 months or more due to accident or sickness would receive a payout from a critical illness policy(1), this type of cover is often seen as an inferior alternative to income protection.best critical illness or income protection

Income Protection

When the own occupation definition of incapacity is used, Income Protection is the most comprehensive form of illness and injury protection available, paying out for any medical condition that prevents the policyholder from working.

Which policy makes 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 too many medical scenarios uncovered.

For example, it is possible to claim on an income protection plan for stress or a back condition whereas these conditions are unlikely to be included on a critical illness plan.


“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 for them is an own occupation income protection plan to cover their monthly financial obligations.”

Tom Conner
Director at Drewberry Insurance


Need help?

As we frequently arrange both income protection and critical illness policies, please feel free to contact us to run through the various advantages and disadvantages of each policy type with one of our expert advisers.

We are able to send you quotes for both plans if you would like, please do not hesitate to pop us a call on 02084327333 or email us at help@drewberry.co.uk.

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