The importance of insurance cannot be ignored in every sector. Globally, most adults have purchased at least one type of insurance in their lives. Income protection insurance and critical illness covers are just some of the insurance options offered in the market. However, choosing between the two does not come easy, at least for most people. While most people would benefit from having both coverages, it is not always an option in most instances. As such, various factors have to be considered including health, type of job and age, among others. To help you choose the best option as per your needs, let’s dive into the differences between the two. 

What is Income Protection Insurance?

This is an insurance coverage that offers a regular income in case the insured is unable to work due to an injury or illness. Most people who are employed often ignore the income protection insurance. However, given that statutory sick pays only pay a small amount of the income, it would be difficult to survive and pay bills when ill, hence the importance of income protection insurance. This ensures that the insured can sustain the same lifestyle and even care for their dependents while they focus on full recovery. 

What are the advantages of income protection insurance? 

• It allows the insured to focus on recovering without the worry of how to sustain their lifestyle
• The payments are often tax-free
• Some plans can be paid till retirement
• Insurance companies can tailor plans based on individual needs and preferences

What are the cons of income protection insurance?

• It can be expensive
• Most plans have a cap on the amount that can be insured
• It excludes certain medical conditions hence the need to check in with an independent specialist before purchasing

What is Critical Illness Insurance?

This is a policy that pays the insured a lumpsum amount if they are diagnosed with a critical illness. The amount issued improved the insured’s financial position and enables them to focus more on recovery. It is important to note that insurance companies list different illnesses that qualify for a lumpsum payment, and these differ with insurance companies. Also, the amount paid depends on age, health, lifestyle and job. 

The illness covered depends on the insurance company. However, most companies offer critical illness insurance for many illnesses. As such, it is vital to speak to an independent specialist who will help you understand the insurance limitations and exclusions. This is a great way to avoid getting short-changed when the time to make a claim comes. 

What are the benefits of critical illness insurance? 

• The lumpsum payment offered helps the insured to replace income, offset debts and even pay for specialized treatment
• Some plans offer payments for dependents in case they become ill
• Some insurance providers offer partial payments for less serious illnesses

What are the cons of critical illness insurance?

• They can be expensive
• They differ among different insurers hence can be confusing

Similarities between Income Protection Insurance and Critical Illness Insurance

• Both provide crucial benefits to the insured in case the insured peril occurs

Differences between Income Protection Insurance and Critical Illness Insurance

Definition

Income protection insurance refers to an insurance coverage that offers a regular income in case the insured is unable to work due to an injury or illness. On the other hand, critical illness insurance refers to a policy that pays the insured a lumpsum amount if they are diagnosed with a critical illness.

Payment

While income protection insurance offers monthly payments, critical illness insurance is paid in a lumpsum amount. 

Coverage

Income protection insurance covers any factors that incapacitate the insured in the event of a valid claim. On the other hand, critical illness insurance only covers specified illnesses. 

Income Protection Insurance vs. Critical Illness Insurance: Comparison Table

Summary of Income Protection Insurance vs. Critical Illness Insurance

Income protection insurance is an insurance coverage that offers a regular income in case the insured is unable to work due to an injury or illness. On the other hand, critical illness insurance refers to a policy that pays the insured a lumpsum amount if they are diagnosed with a critical illness.

FAQs

Is critical illness insurance the same as income protection?

No. Critical illness insurance refers to a policy that pays the insured a lumpsum amount if they are diagnosed with a critical illness while income protection insurance refers to an insurance coverage that offers a regular income incase the insured is unable to work due to an injury or illness. 

Can you claim income protection and critical illness?

Yes, you can claim both income protection and critical illness if you have purchased both policies. 

What is the difference between income protection and life insurance?

Income protection insures your income while life insurance insures your life. As such, if you have income protection, you will be paid if you lose your source of income due to an illness or injury. On the other hand, life insurance will pay a lump sum to the beneficiary if you are diagnosed with a terminal illness or you pass away. 

What is the difference between critical illness and life insurance?

Critical illness pays a lumpsum amount if the insured is unable to work due to an illness or injury. On the other hand, life insurance pays a specified amount to a beneficiary if the insured dies or is diagnosed with a terminal disease. 

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