Should I take out critical illness or income protection cover?

There’s never been a better time to think about having a financial safety net if you can’t work and will struggle to pay your bills. With the cost of living continuing to impact so many households, taking out insurance that will pay out a tax-free lump sum or cover the cost of your lost income is a plan well worth considering.

The first step is to understand the difference between critical illness cover or income protection insurance. Both offer a great range of benefits, but are very different types of personal protection insurance and depend on several personal factors.

Critical illness insurance – key facts

A critical illness policy will provide you and your family with a tax-free cash lump sum payment if you’re diagnosed with a serious illness on a defined list of covered conditions, including cancer, a heart attack and a stroke. It’s there to give you financial breathing space while you recover and can be used to pay off or reduce your mortgage or debts or to make alterations to your home if they’re needed.

95% of critical illness claims are paid out each year – those that are unsuccessful are mainly due to non-disclosure of important information. Some policies will even pay out if your children are diagnosed with a critical illness so cover is certainly worth serious consideration if you have a family.

Income protection insurance – key facts

An income protection policy will replace your earnings with tax-free monthly payments if you’re unable to work due to an illness or injury. Remember that state benefits such as statutory sick pay will only pay out for a short time – income protection will give you long-term financial security so you’re able to keep on top of your bills while you recover.

The cost of income protection insurance will depend on your personal circumstances, such as your health, your job, the length of the deferred pay-out period and other factors that can be used to tailor the cost of your plan. You can make multiple claims – even for the same reason but, depending on your policy, some medical conditions could be excluded.

Which insurance cover is right for me?

The reality is that both critical illness cover and income protection insurance provide valuable protection for you and your family and, when things go wrong, you’ll benefit from financial support.

If you can afford it, it’s worth taking out a range of cover of each type of insurance, but if you have to decide on one, there’s no substitute for specialist financial advice from an insurance protection expert who’ll help you choose the best policy for your circumstances.

If you’re looking for a financial safety net should you lose your income due to illness, all the insurance protection experts at Mortgage Decisions on 03454 500200 to talk about income protection and critical illness cover that’s right for you.