Sales of critical illness (CI) policies in the UK far outweigh those of income protection (IP) probably because people prefer receiving a lump sum on a qualifying claim instead of regular payments.
However, when one is asked what is a client’s most valuable asset, many would answer their home or their investments but it should not be forgotten that the person's earnings potentially supports most other elements.
So when we are asked whether someone should have one or the other, it really depends on the person's circumstances – in an ideal world they should have both, as the policies are quite different as we can see below.
What is covered?
CI – A specific list of illnesses or conditions
IP – Loss of earnings due to sickness and injury
How much is the benefit?
CI – Depends on level of cover taken out
IP – Usually around 50-70% of your gross income
How is it paid?
CI – As a lump sum
IP – As a regular payment, usually monthly
When will it pay out?
CI – On diagnosis and a survival period (usually one month)
IP – Usually after a deferment period following illness or injury, typically 3 months
There are important factors which you need to be aware of:
Critical illness cover will only pay out if your illness or condition matches one of a number offered by the insurer. This list can and does vary between them and you need to take this into account when effecting the plan.
Income protection policies also differ between provider and you need to be careful to select one which will cover your occupation or duties. Some plans won’t pay out if you can carry out another or similar occupation. You also need to prove your earnings.
In both cases it is vitally important to disclose all personal and medical information clearly to save any potential dispute later.
Hopefully the above has helped provide some clarity around which cover does what and the advice would always be to seek expert guidance so that cover can be matched to individual circumstances.
The above is provided for information purposes only and we recommend that professional independent advice is taken prior to making any decisions or taking any action.
However, when one is asked what is a client’s most valuable asset, many would answer their home or their investments but it should not be forgotten that the person's earnings potentially supports most other elements.
So when we are asked whether someone should have one or the other, it really depends on the person's circumstances – in an ideal world they should have both, as the policies are quite different as we can see below.
What is covered?
CI – A specific list of illnesses or conditions
IP – Loss of earnings due to sickness and injury
How much is the benefit?
CI – Depends on level of cover taken out
IP – Usually around 50-70% of your gross income
How is it paid?
CI – As a lump sum
IP – As a regular payment, usually monthly
When will it pay out?
CI – On diagnosis and a survival period (usually one month)
IP – Usually after a deferment period following illness or injury, typically 3 months
There are important factors which you need to be aware of:
Critical illness cover will only pay out if your illness or condition matches one of a number offered by the insurer. This list can and does vary between them and you need to take this into account when effecting the plan.
Income protection policies also differ between provider and you need to be careful to select one which will cover your occupation or duties. Some plans won’t pay out if you can carry out another or similar occupation. You also need to prove your earnings.
In both cases it is vitally important to disclose all personal and medical information clearly to save any potential dispute later.
Hopefully the above has helped provide some clarity around which cover does what and the advice would always be to seek expert guidance so that cover can be matched to individual circumstances.
The above is provided for information purposes only and we recommend that professional independent advice is taken prior to making any decisions or taking any action.
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