With all the different types of income and mortgage protection insurance, it can be challenging to understand which insurance plans cover which situations, and which plan is right for you. In this post, we'll examine the difference between income protection insurance and critical illness cover, and what factors might lead you to choose one type of insurance over another.
Critical Illness Cover
Did you know that almost 300,000 British residents are diagnosed with cancer each year? Outside of skin cancer, breast cancer, lung cancer, and colorectal cancer are the most common types of cancer in the UK – all of which can entail intensive medical treatment and time off work.
Cancer is just one critical illness that may lead to serious financial stress for you or your family; in addition to cancer, there are a whole host of illnesses that may interrupt your normal daily life, and especially your career.
Critical illness cover pays a tax free lump sum or an income for a period of time should you be diagnosed with one of the covered critical illness. The money the policy pays out has no restrictions on the way in which you use it. If you require ongoing care, you may use the money to hire help; if your illness will eventually take your life, you may use the money to take that world tour you always dreamed of.
Who Needs Critical Illness Cover?
Unfortunately, 93% of the working population has no form of serious illness protection, yet one in three men over the age of 30 will suffer from a stroke, cancer or have a heart attack before they turn 65, and one in five women will experience the same. If you have a family history of these types of illnesses, you should definitely consider some form of insurance. Discuss your risk factors with your physician to better understand your level of risk.
ASU and Income Protection Insurance
There are two primary types of income protection insurance in the UK. The first is Accident, Sickness and Unemployment, or ASU insurance. Under this type of policy, benefits can only be claimed for one or two years. In essence, these policies are designed to help people who suddenly experience a loss of income to stay on their feet until their situation stabilises.
By contrast, an Income Protection policy has a much longer period of benefit. Should an illness or an accident leave the policyholder unable to work for the rest of his or her life, benefits can be claimed for 25 to 45 years.
The Difference Between ASU/Income Protection and Critical Illness Cover
A critical illness cover does just that – provides income support when the policyholder is rendered unable to work by a predefined serious illness. Critical illness cover pays out immediately, whether or not the policyholder still has a job. Payouts come at the time of diagnosis – there is no waiting period, and the benefit can be attained as a lump sum or as an income.
Critical illness however, can be very selective in the illnesses it will insure. For example, it does not cover mental health issues such as debilitating depression, bipolar, or anxiety disorders. Some of these mental health issues can be serious enough to cause an inability to gain or keep employment.
Both ASU insurance and income protection insurance cover a broader range of issues. By its very name, for example, ASU insurance will cover the policyholder in the case of an accident, but critical illness cover will not. Likewise, insurance protection insurance will last for a significant period of time regardless of the reason for unemployment, whereas critical illness and ASU insurance both have shorter benefit periods.
* Consider critical illness cover if your family has a history of serious illnesses (other than mental illness).
* Consider ASU insurance for general, short-term income protection.
* For greater peace of mind, supplement your coverage with income protection insurance, wherein coverage will last your working life.
* Don't be part of the 93% of Brits who have no coverage whatsoever.