Income Protection or Critical Illness Insurance?

Critical Illness Cover, Income Protection Insurance, or even both?

33.7 million working days were lost in 2023–2024 (Health & Safety Executive, November 2024) due to non-fatal workplace injuries and illnesses. Of these, 4.1 million days were linked to injuries, while 29.6 million were due to work-related illnesses.

On average, each working person affected took approximately 15.5 days off work. This varied depending on the specific health issue. For injuries, individuals took an average of 6.8 days off. Those dealing with ill health cases missed around 17.7 days. Stress, depression, or anxiety resulted in an average absence of 21.1 days. Meanwhile, musculoskeletal disorders led to an average of 14.3 days away from work.

Planning ahead and securing insurance is one of the smartest steps you can take—yet only 10% of UK adults currently have it Income Protection or Critical Illness cover in place.

But what are your options? If you want to protect your income and everything it supports, you might consider Critical Illness Cover, Income Protection Insurance, or even both. While both are designed to offer financial support, they work in very different ways, including how they pay out and what they cover. Let's break it down to help you decide which option fits your needs best.

Why is having health-related income insurance so important?

  • Minimise financial stress when faced with unexpected illnesses or injuries.
  • Replace lost income so you don’t have to rely on your savings or consider remortgaging.
  • Top up state benefits like Statutory Sick Pay, which often falls short of covering essential costs.
  • Keep up with expenses, including utility bills, mortgage payments, childcare, and more.
  • Focus on your recovery without the added worry of making ends meet.

Choosing the right type of coverage can give you greater peace of mind and the reassurance you need during challenging times. It’s all about finding the solution that works best for you and your circumstances.

What is Income Protection Insurance?

Income protection insurance is designed to provide essential financial relief if illness or injury prevents you from working for an extended period.

An income protection policy ensures a steady flow of income, helping you meet important expenses like mortgage payments and household bills for a specified period. You can select from a range of coverage options, both short-term and long-term, to suit your individual requirements. During unforeseen circumstances, this insurance can lessen the financial strain on your family, granting peace of mind and stability.

This insurance helps self-employed individuals uphold their financial commitments and sustain their lifestyle even when work is not possible.

 There are a number of Income Protection policy types, including Accident and Income Protection Insurance, Accident & Sickness Cover, and Income Protection for NHS Doctors and Dentists. Cleerly have specialist expertise in catering for complex circumstances, including contractors and self-employed workers, where the key features of a policy may include:

  • Coverage: Typically covers up to 70% of your regular income, ensuring you receive a significant portion of your earnings to support your financial needs.
  • Benefit Period: You can select how long the benefits are paid, from several months to extending up to retirement age.
  • Waiting Period: Standard waiting periods range from 4 weeks to 12 months before benefits begin.
  • Advantages: These policies are highly flexible, allowing customization to fit your unique requirements and circumstances, ensuring you receive the right protection.

What is Critical Illness Insurance?

Critical illness insurance pays a lump sum to provide financial relief during treatment and recovery from a serious illness. The stress of unpaid bills is the last thing you need when recuperating, so this support provides independent professionals with the reassurance they need to financially support themselves and their families during challenging times.

The three most common claims for critical illness insurance are for cancer, heart attacks, and strokes.

In addition to these "big three" conditions, critical illness insurance typically covers anywhere from about 10 to over 100 serious or critical illnesses, depending on your insurer.

Other commonly covered conditions include multiple sclerosis, permanent loss of vision or hearing, loss of limbs, motor neurone disease, and organ failure or transplant. Each insurer defines these illnesses differently, setting a "threshold" for the severity required to make a successful claim.

Do I need Income Protection, Critical Illness or both?

Critical Illness Cover and Income Protection Insurance cater to different needs, leading to distinct differences between these insurance products. Here's a quick comparison:

Income Protection Cover

Income Protection helps safeguard your income by providing a regular monthly benefit to cover bills if an illness or injury prevents you from working. This can be particularly appealing if you’re not eligible for statutory sick pay or if your income would decrease.

  • Designed to pay out if unable to work due to illness or injury
  • No lump sum
  • Pays a monthly benefit for a valid claim
  • Pays out after a waiting period of 4, 8, 13, 26 or 52 weeks – it's up to you. Pay outs are monthly in arrears

Critical Illness Insurance

Critical Illness Cover offers a one-time cash payout if you're diagnosed with a serious or life-changing condition covered by the policy. This cash sum can assist with treatment and recovery time and can be used to pay off a mortgage or cover other daily living expenses.

  • Pays out if you’re diagnosed with a specified illness
  • Pays a lump sum
  • Pays out once (for a valid claim)
  • A claim can be made if you survive for 14 days from diagnosis

Summary

Ideally, having both Income Protection Insurance and Critical Illness Cover offers the best safety net. For instance, if you were diagnosed with a serious illness like cancer (which we sincerely hope never happens!) and couldn’t work, income protection would provide a steady monthly income to cover your living costs. At the same time, your critical illness policy would pay out a lump sum, which you could use for specialist treatment or significant expenses like paying off your mortgage.

However, we understand that not everyone’s budget allows for both. That’s why many people opt for one type of cover based on their needs and priorities. Either way, having some level of protection can make a world of difference when life takes an unexpected turn.

Deciding how to protect yourself and your loved ones can be challenging but choosing either Income Protection Benefit or Critical Illness Cover, or both for comprehensive peace of mind, ensures you have financial protection and peace of mind. With over 20 years of experience supporting contractors and independent professionals, Cleerly's Protection Consultants specialise in offering tailored advice that suits individual needs. To explore the best life cover options, call us on 02394 212 912 for an obligation-free discussion or request a callback .

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Whether you’re looking to get the ball rolling on an application or you’re just after some friendly advice, don’t hesitate to give us a call on 02394 212912 or complete the form below.

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