What's the Difference Between Income Protection and Critical Illness?
We are often asked the question "Is there any difference between critical illness cover and income protection?"
There may be a occasions when both critical illness cover and income protection cover may pay out.
However, analysis of claims paid shows the causes of payouts are markedly different.
Scottish Provident's critical illness paid claims from 1 January to 30 June 2008 shows the claims were mainly for cancer, heart attack and stroke.
Axa's income protection paid claims, over the long-term, from 1989 to 2007, shows over half of claims being of a psychological or musculoskeletal origin.
A psychological disorder, for example, stress, (unless there were an underlying 'critical illness') would not be paid under a critical illness policy,
Yet psychological ailments, alone, account for (on Axa's paid claims history) for over 40% of all claims.
In addition to the difference in the causes of claims, there is one other crucial difference:
- Critical illness cover is primarily designed to pay out a lump sum
- Income protection cover is designed to pay out a continuing income.
Critical illness cover can have a benefit known as 'total and permanent disablement' (TPD) however, to make a TPD claim, your disability must be permanent, with no prospect of recovery.
Income protection will pay out even if you are merely temporarily unable to work, (due to illness or accident, it doesn't matter. You do not have to be permanently incapable of working.