Critical Illness Cover Vs Income Protection

We all know Life Insurance pays out on death, but what happens if you fall critically ill? Are you covered then?

If you were diagnosed with a life-threatening illness or had a severe accident, do you have the financial buffer to support yourself and continue to cover your outgoings?

Additional cover like Critical Illness or Income Protection can keep your family together and insulated from financial worries at an incredibly stressful time. If that’s ringing any alarm bells for you, Mashroom Mortgages’ Kirsty Primmer takes a critical look at these critical additional covers.

What is Critical Illness Cover?

Critical Illness Cover is an insurance that can clear the whole mortgage or a proportion of the mortgage, depending on the level of cover you take, when you are diagnosed with a critical illness.

What is defined as a critical illness and what CIC covers depends on the insurer, but it will cover things like cancer, for instance, which is the top paid for claim. For most insurers, about two-thirds of the claims that they pay out every year are for cancer, so you’ll find that most insurers do cover all types of cancer.

However, they may cover what they class as ‘less severe’ cancers at a smaller scale. For example, with skin cancer, they may only pay out 25% of what the full claim could be.  

When it comes to something like a heart attack, some insurers will pay out on all heart attacks, but others will pay out on a severity level basis. So it is absolutely paramount that you get the right advice on what insurance is best for you, depending on your needs.

What is Income Protection?

Income Protection does exactly what it says – it protects your income. Should you be unable to work due to any accident or sickness, it will pay a certain proportion of your salary until you can go back to work.

Some people might have three months sick pay, so Income Protection would start paying out after that three months of sickness, this can ensure that you can keep your roof over your head and make sure all the bills are paid.

The anxiety of illness is massive on its own, so adding financial worries to that exacerbates it. Income Protection takes away that strain and that worry.

How much crossover is there then between Critical Illness Cover and Income Protection?

Critical Illness Cover will pay a lump sum, it will clear the mortgage or or pay a lump sum. What Income Protection does is keep the roof over your head; it could pay for your gas, electric, water, council tax, all those everyday things. Even if the mortgage is gone, there are still bills landing on your doormat every month and that’s where Income Protection comes in, helping you cover those regular outgoings on a month-to-month basis.

When you’re talking about Critical Illness Cover, you’re talking about very serious, potentially life-terminating, illnesses. On the other hand, one of the top claimed-for conditions with Income Protection is actually musculoskeletal, so back problems, neck problems, etc.

For most insurers, the second or third most-claimed for are mental health problems. With CIC, there are one or two insurers that will pay out for bipolar on a CIC, because it can be life-threatening. 

Why do I need Critical Illness Cover and Income Protection?

If you’re thinking ‘Well I’ve got Life Insurance, why do I need to have Critical Illness Cover?’ consider this: Life Insurance is great for those that you leave behind, ensuring that your family don’t have to struggle in your absence.

But what CIC and IP will do is support your family right now and help you while you’re here, so you don’t have to consider anything as drastic as selling your home. 

Should I get Critical Illness Cover or Income Protection?

This entirely depends on you and your circumstances and needs. Having both is taking a belt and braces approach that means that should you be diagnosed with a life-threatening illness, your mortgage will be cleared and you will be covered with a monthly income that will cover the other bills. The two pieces of cover work hand-in-hand.

As a landlord, you may have an additional income from your rental property or properties, but can that cover all of your expenses in the event that you need it to? If you have just one investment property, it’s unlikely to be able to cover the mortgage on your residential property and other bills. 

If you’re keen to learn more about the add ons that you could benefit from, book a call with Kirsty today.

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Mashroom is an appointed representative of Adelphi Insurance Brokers Ltd. Adelphi Insurance Brokers Ltd is authorised and regulated by the Financial Conduct Authority (FCA). Their Financial Services Register number is 594620, with permitted business activities being introducing, advising, arranging, dealing as agent, assisting in the administration and performance of general insurance contracts and credit broking in relation to insurance instalment facilities. You may check this on the Financial Services Register by visiting the FCA’s website, register.fca.org.uk or by contacting the FCA on 0800 111 6768