When it comes to protecting your income and your future, there’s no shortage of insurance options. But two types of cover often cause the most confusion: income protection insurance and critical illness cover. Both can offer financial support when your health takes a hit, but they work in different ways.
So, how do you know which one you need, or whether you might benefit from both? In this guide, we’ll explain the key differences, how each type of cover works, and what to consider before making a decision.
What is income protection insurance?
Income protection is designed to replace part of your income if you’re unable to work due to illness or injury. Whether you’re off work for a few months or several years, it can help you keep up with essential living costs until you’re well enough to return.
Policies typically pay out a monthly benefit, usually around 50–70% of your usual earnings, after a waiting period known as the “deferred period”.
Key features:
- Covers most illnesses and injuries that stop you from working
- Pays out regular monthly payments, not a lump sum
- Can be short-term (1–2 years) or long-term (until retirement or recovery)
- Often includes rehabilitation support to help you return to work
What is critical illness cover?
Critical illness cover, on the other hand, pays out a one-off lump sum if you’re diagnosed with a serious condition listed in the policy. This might include things like cancer, heart attack, stroke, multiple sclerosis or major organ failure.
It’s not tied to your ability to work in the same way as income protection is. Instead, it’s there to provide breathing room after a major diagnosis, whether that’s paying for private treatment, adapting your home, or covering time off work.
Key features:
- Pays a tax-free lump sum upon diagnosis of a qualifying condition
- Covers a set list of illnesses and procedures
- Doesn’t require you to be off work to claim
- Often added to life insurance as part of a combined policy
How are they different?
While both policies offer protection against health-related setbacks, they do it in very different ways.
| Feature | Income Protection | Critical Illness Cover |
| Type of payout | Monthly income | One-off lump sum |
| When it pays | When you’re unable to work due to illness or injury | When you’re diagnosed with a listed serious illness |
| How long it pays | Until you recover, retire, or policy ends | Just once, per claim |
| Conditions covered | Any condition affecting your ability to work | Only specified illnesses |
| Purpose | Helps replace lost income | Helps with one-off costs or lifestyle changes |
| Can you claim multiple times? | Yes, for multiple absences | Usually just once |
Which one is right for me?
It really depends on what you want to protect, and how much financial risk you’re exposed to if your health takes a turn.
Income protection might suit you if:
- You rely on your income to cover rent, mortgage or bills
- Your employer doesn’t offer generous sick pay
- You’re self-employed or freelance
- You want ongoing support while recovering
- You’d struggle to get by without a regular income
Critical illness cover might suit you if:
- You’re more concerned about the impact of a life-changing diagnosis
- You want a lump sum to pay off debts or adapt your home
- You’d like to supplement your existing income protection or savings
- You have dependents and want to make sure big expenses are covered
- You’re already covered by employer sick pay but want extra protection
Can I have both?
In many cases, having both policies gives you the most comprehensive protection. Think of it this way:
- Critical illness cover helps you deal with the immediate costs of a serious diagnosis.
- Income protection keeps money coming in while you’re unable to work, whether that’s due to a listed condition or something else entirely, like back problems, mental health issues or an accident.
Having both types of cover means you’re better prepared for a wider range of scenarios, from temporary injuries to long-term illness.
What about getting cover through work?
Some employers offer critical illness cover or income protection as part of their benefits package. It’s worth checking, but be aware:
- It may only cover a basic level of protection
- You might lose it if you change jobs
- The cover may not be tailored to your personal circumstances
If you’re relying on workplace protection, make sure you understand the details, and consider topping it up with your own policy if needed.
How much do they cost?
As with any insurance, the cost depends on a few key factors:
- Your age
- Your health and medical history
- Your occupation
- How much cover you want
- The length of the policy
Generally speaking, income protection tends to cost more than critical illness cover, simply because it can pay out over a longer period. However, it can be invaluable if you rely heavily on your income.
Critical illness cover can be more affordable, particularly if added to a life insurance policy, but the payout is more limited in scope.
Final thoughts
No one likes to think about getting seriously ill or being off work for months, but having the right insurance in place can make all the difference if the unexpected happens.
If your budget allows, a combination of income protection and critical illness cover offers the most complete safety net. But even one policy can go a long way in protecting your financial well-being.
Still unsure? Speaking with a regulated adviser can help you figure out what level of protection fits your needs and budget.
