A Guide To Income Protection vs Critical Illness Cover

Finding the right personal protection insurance can be a lengthy and difficult process. Here at WIS Business Protection, we want to educate you about relevant life insurance policies, focusing on Income Protection Insurance and Critical Illness Cover. Below, we take a closer look at these personal protection insurances, including their advantages and disadvantages, and hopefully guide you to picking the policy that suits you best.

What is Income Protection Insurance?

Income protection insurance (IPI), also referred to as sick pay insurance or permanent health insurance covers your income when you’re unable to work as a result of illness or injury. This insurance provides you with peace of mind by offering long-term income security – this way, you don’t have to worry about limited statutory sick pay running out and you can prioritise your recovery.

The price of this policy will vary as a result of a number of factors. This includes the type of job that you have, your health as well as how quick you want the deferred period to be (this means how fast you would like the policy to be paid out).

For more information about personal income protection, you can check out our Income Protection Guide.

What Are The Advantages of IPI?

The advantages of an IPI insurance policy include:

  • This policy covers any incapacity – you don’t have to meet specific conditions.
  • These plans can pay out until you reach retirement age.
  • IPI plans can be individually tailored to suit your personal situation, which can help to reduce the cost of the policy.
  • You can make multiple claims of IPI even if the same reason is provided for each claim.
  •  The monthly benefit from the policy is tax-free.

What Are The Disadvantages of IPI?

Here are some potential disadvantages of this policy:

  •  It can be expensive as it’s based upon your health status and your job type.
  • Existing medical conditions may be excluded.
  • The available options are confusing so may require discussion with a specialist.
  • You can only insure up to a maximum of 60% of your income for a personal plan and up to 80% of your income for an executive income protection plan.

What is Critical Illness Cover?

Critical Illness Cover (CIC) works by paying out a lump sum directly to you when you have been diagnosed with a critical illness. This is only applicable if the critical illness that you have been diagnosed with meets the insurance company’s list of covered critical illnesses. This lump sum payment works to provide a financial boost that enables you to prioritise your recovery.

Most insurance companies offer critical illness cover for between 50 and 180+ illnesses. Despite some bad press around this policy, around 95% of CIC claims are successfully paid out. For the best results of successful payment of CIC, we would strongly recommend contacting a specialist to maximise your chances of receiving payment.

For more information about our relevant life insurance services, you can visit our website to contact us.

What Are The Advantages Of CIC?

These are the advantages of a CIC policy:

  • The payout is tax-free.
  • The lump sum paid can be put towards reducing debts, the payment of private treatment or replacing your income.
  • Less serious conditions can still claim partial payments.
  • Some CIC policies will provide a payment if your child becomes critically ill.

What Are The Disadvantages Of CIC?

These are some disadvantages:

  • Your critical illness must meet the insurer’s definition of critical illness.
  • The many different available options can be confusing and require specialist advice.
  •  It’s expensive in some cases.

Income Protection vs Critical Illness Cover

Choosing between these two personal protection insurance policies can be difficult as they both offer advantages and potential disadvantages. Consider your situation and decide which policy would benefit you the most. Consider if it will provide peace of mind so that you can recover in the event of illness or injury.

Join 3 million UK workers who have income protection insurance today. Our best advice is to contact one of our specialists to discuss executive income protection and find the best personal protection insurance policy for you. You can contact one of our specialists via our contact page.