The Differences and Similarities between Serious Illness Cover and Income Protection

To help you make an informed choice, it’s important to understand the differences between serious illness and income protection covers:

Inability to work vs medical diagnosis of a critical illness

You can claim income protection if you’re no longer able to work. This could be because of a health condition including a serious illness, or physical injury. Serious illness cover involves you being formally diagnosed with a specific illness covered by your policy.

Lump sum or regular income

A valid serious illness claim would give a lump sum payout. By contrast, income protection insurance helps to cover your regular monthly earnings when you can’t work.

Deferred payment or immediate support

Income protection plans often feature a deferral period, set by you. This is the length of time you’re willing to wait before the first payment is received. By comparison, as soon as an insurer processes and validates a serious illness claim, the payout follows.

Cost of policy

Often, income protection can cost more than a serious illness policy. This is because income protection often lasts longer and includes more reasons for not being able to work. The amount of financial support is also open-ended. It provides cover until you either return to work or retire. Serious illness cover commonly relates to a shorter period of time where the value of a potential payout is fixed. As a result, it can cost less than income protection.

Both relate to your health

Both forms of cover come take effect when you face illness. They provide financial support to you and your loved ones during challenging times. Income protection is slightly different. It might also pay out if you can’t work through injury, which serious illness insurance is unlikely to cover.

Both pay out during your lifetime

Both income protection and serious illness cover are there to support you while you are alive. They both provide financial relief during your recovery. A payout could help cover the costs of lifestyle changes, mortgage repayments or general living costs.