Income Protection VS Critical Illness Insurance in the UK. What is the Difference?

If you’re shopping for a policy in the UK to get you through a period of illness you may have heard of income protection insurance as well as critical illness insurance. Both of these insurance policy schemes promise to have your back during trying times, but what makes them stand apart from each other, and more importantly, which one is right for you?

In this article we look at what each type of insurance offers and their key components to help you understand your choices.

What is critical illness and income protection insurance?

First, let’s look at what they are by definition. Critical illness cover is an illness coverage insurance that aims to provide the much needed financial aid during major illnesses.

Income protection aims at providing you with a regular income of funds when you are unable to continue work because of illness or injury.

The key difference in these is that while critical illness insurance pays out one lump sum after which the policy ends, income protection insurance on the other hand supports you until you return to work, retire, or pass away by allowing you to make as many claims as you need during the period of the policy.

What does critical illness insurance cover in the UK?

Any major and life threatening illnesses mentioned in the policy such as heart attack, stroke, certain types and stages of cancer, Parkinson’s disease and Alzheimer’s disease.

Some insurers may also make a payout of up to 50% of your claim for your children if they are diagnosed with any of the listed critical illnesses.

How does critical illness insurance work?

When you make a claim, you will receive a tax-free lump sum which you can use in any way you need to. Ideally it should be utilised to cover medical bills, but not necessarily and can be used to cover transportation costs, household bills,etc.

To make a successful claim the insured person will need to survive past 10 days or more (depending on the policy) after the diagnosis of the illnesses listed in policy is made. This also means that if you are diagnosed with a disease that is not covered in the policy you will not be able to make a claim. This also applies to the severity of the case. For instance, you may not be covered for the early stages of cancer. The cost of your cover will depend on your age, duration of the cover, medical history, job and how much you expect to receive.

What does income protection insurance in the UK cover?

The focus of income protection is to provide a replacement of income if you lose your earnings due to illness or injury. This could be either until you return to work, retire or pass away, or until the policy ends. Similar to critical illness insurance, to be eligible for payout you must be within the categories of illnesses or injuries that’s covered by the policy. However, income protection clauses are not as limited as those in critical illness insurance.

How does income protection insurance work?

Income protection insurance pays out between 50% to 70% of your monthly earnings before income tax. You can expect to make as many claims you need until you can get back to work, retire, pass away, or the policy ends.

This means that if your policy is set for two years you will receive payment for this time period and if your policy is set to end at a specific age, you are entitled to make claims until you reach the specified age.

When calculating premiums the insurer will consider your age, medical history, lifestyle, type of job, percentage of income for your monthly expenses.

How to choose between critical illness insurance and income protection insurance in the UK?

When choosing between critical illness insurance and income protection insurance you need to consider your financial stability and how beneficial each policy is for you.

Some questions to ask yourself would be:

  • Do you receive any income protection through your employer?
  • Do you have any dependents?
  • Are you the sole provider?
  • Have you made any financial commitments like paying off a mortgage?
  • Do you have enough savings to pull you through a rough time?

Depending on your answers to these questions your decision will be based on if you can manage with one lump sum or if you will need assistance throughout the period you are unable to work.


Before you make a decision, always read through the policy terms and inspect each condition. Look out for what illnesses/injuries are covered, how severe the illness or injury should be in order  to make a claim.

If you’re unsure about which insurance plan is suitable for you, speak to one of our expert insurance brokers at BVS today! They will gladly help you with your choices and understand what’s right for your future financial security.

* Approved by The Openwork Partnership on 26th July 2023.

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