It's never nice to think about what would happen if you were suddenly unable to work. Whether it be through illness or injury, being off work can be a stressful time, especially if you are without support.
Thankfully, two types of cover can help provide crucial support – income protection and critical illness. In this guide, we'll explain how each of these policies works and their main differences.
What is critical illness insurance?
Critical illness insurance pays out a tax-free lump sum if you’re diagnosed with a specific serious illness listed in your policy. Most policies include major conditions such as cancer, heart attack, stroke, loss of limb, sight or paralysis.
You can use the money however you like. For example: to help cover mortgage payments, clear debts, replace lost income, or even to remodel your home to be more accessible if you have additional needs after your illness. For more information on what the policy covers, see our guide on 'What illnesses does critical illness insurance cover?'.
When does the policy end?
In most cases, once a full payout is made, the policy ends. Some policies offer additional features that allow partial claims for certain conditions without ending the cover, but this varies by insurer.
Please note: The insurance products offered by Cavendish Online have no cash-in value at any time. If you stop paying your premiums your cover will stop, your policy will end, and you will receive no benefit.
If you have not claimed before the end of your chosen policy term, the policy will end, and no benefit will be paid.
If you are facing financial difficulty, please contact your insurer before cancelling your policy or letting it lapse. They may have options available that means you don't have to lose the plan.
Who is it designed for?
Critical illness cover is often used by people who want:
- A lump sum to clear large financial commitments
- Mortgage protection
- A financial safety net in case of a life-changing diagnosis
It’s less focused on replacing income long-term and more about providing a substantial one-off financial cushion.
What is income protection insurance?
Income protection insurance works very differently. Instead of a lump sum, it provides a regular monthly income if you’re unable to work due to illness or injury. Like critical illness cover, it can be combined with other types of protection, such as life insurance.
It’s also possible to claim on the policy multiple times throughout the term, providing you meet the terms & conditions.
What does it cover?
Income protection usually covers a much broader range of medical conditions than critical illness cover, including:
- Stress and anxiety
- Depression
- Back pain
- Musculoskeletal injuries
- Long-term sickness
- Serious illness
As long as your condition prevents you from doing your job, you’re signed off work by a doctor, and the terms & conditions of the policy are met, the policy can pay out.
When the policy pays out will depend on the policy. Short-term policies may pay for 1–5 years per claim. Whereas long-term policies can pay until you return to work, retire, or reach the end of the policy term.
How much does it pay?
Typically, income protection pays:
● Up to 50–65%of your gross salary
● On a monthly basis
● After a chosen waiting period (called a deferred period)
The deferred period can range from one day, 4 weeks, 6 months or even up to 5 years with certain insurers.
This is set up at the start of the plan, so you can take into consideration any sick leave you already have. The longer the deferred period, the cheaper the premium usually is.
Please note: The insurance products offered by Cavendish Online have no cash-in value at any time. If you stop paying your premiums, your cover will stop, your policy will end, and you will receive no benefit.
If you have not claimed before the end of your chosen policy term, the policy will end, and no benefit will be paid.
Pros and cons of critical illness cover
Both policies can provide valuable financial support, but they come with their own benefits and drawbacks. Here's a closer look at the pros and cons of critical illness cover:
| Pros | Cons |
|---|---|
When you apply, you decide how much cover you want. This allows you to tailor the policy around your mortgage, debts, income, or family needs. If your employer offers some form of sick pay, you can use the policy to compliment this by covering any potential financial gaps that could arise from a serious health condition. | Only covers specific conditions Not all conditions are covered. If your illness isn’t listed in the policy or doesn’t meet the insurer’s definition, the policy won’t pay out. For instance, not all cancers are covered at every stage, and some conditions must reach a certain level of severity before a claim is valid. |
The payout can be used for anything from childcare and bills to everyday living expenses while you recover. Some people use it to reduce financial pressure by paying down large commitments like a mortgage. | May not cover pre-existing conditions If you have an existing medical condition when you apply for the policy, this also may be excluded along with known complications. Because of this, it’s important to shop around to help ensure you have the right plan for your circumstances. |
Most policies include major illnesses such as many types of cancer, heart attacks and strokes, along with other serious conditions defined in the policy wording. |
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Some insurers may allow you to increase your cover after certain life events (like having a child or moving home) without further medical underwriting. It's always best to review your cover every so often to make sure it matches your current needs. | Typically pays once and ends In most cases, once a full claim has been made, the policy ends. This means you won’t be covered for future illnesses unless you take out a new policy. By then it may be more expensive or harder to obtain, depending on your health at that time. |
Critical illness cover is often combined with life insurance under one policy. Both can provide adequate protection, though they have some differences when used separately. See life insurance vs critical illness cover for more information. |
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Pros and cons of income protection insurance
Income protection can offer valuable long-term financial security if you’re unable to work. Here are the policies' strengths and weaknesses:
| Pros | Cons |
|---|---|
Covers a wide range of conditions Unlike critical illness cover, income protection doesn’t rely on a fixed list of serious illnesses. It can pay out for many physical and mental health conditions, such as stress, anxiety, depression, back problems and musculoskeletal injuries. This is providing they prevent you from doing your job under the policy definition. | No lump sum payout Income protection won’t provide a large one-off payment to clear a mortgage or major debts. If you need immediate capital to reduce financial commitments, another type of cover may be more suitable. |
Provides ongoing monthly income Rather than a one-off payment, you receive regular monthly payments. This can make it easier to manage everyday living costs such as mortgage or rent payments, utilities, food and childcare. | May not cover pre-existing conditions If you have an existing medical condition when you apply for the policy, this also may be excluded along with known complications. Because of this, it’s important to shop around to help ensure you have the right plan for your circumstances. |
Long-term support available Some policies can continue paying until you return to work, reach retirement age, or the policy term ends. For long-term illnesses or disabilities, this can provide sustained financial stability. | The deferred period can delay payments You must wait for your chosen deferred period before payments begin. It could create short-term financial pressure if you don’t have savings or sick pay to cover this gap. |
You could claim multiple times If you do claim on the policy and then recover and return to work, you may be able to claim on the policy again for the same condition, or something new, providing that you’re still within the term of the policy and meet the terms set out by the insurer. | Doesn’t replace your full salary Policies usually cover up to 50–65% of your gross income. Because of this, you may need to budget carefully once you receive payments, as you won’t receive enough to cover your full earnings. |
One of the key benefits of income protection is that it's flexible and can be tailored to your circumstances. With it you can choose:
This allows you to align cover with savings, employer sick pay or other financial arrangements. | Payments stop when you return to work Based on the policy’s incapacity definition, your payments will end once you’re medically fit to return to work. So, if your condition improves, even partly, it could affect ongoing claims. |
Strong option for self-employed workers If you’re self-employed and don’t have access to employer sick pay, income protection can be particularly valuable. It can act as your primary financial safety net should an illness or injury prevent you from earning. | Can be more expensive for higher-risk occupations Your job, health, age and lifestyle can all influence the cost of your cover. For those in manual or high-risk occupations, it may result in higher premiums or exclusions. |
Policies can include additional features Some insurers offer added benefits such as rehabilitation support, return-to-work assistance, or limited payments while you recover gradually. | More complex compared to simpler policies Income protection policies are often more complex than policies like life insurance because they include specific terms around deferred periods, benefit levels, and what counts as being unable to work. Some conditions may only trigger partial payments, certain jobs may be treated differently, and exclusions or waiting periods can affect when you start receiving benefits. |
The key differences
| Critical Illness Cover | Income Protection |
|---|---|---|
Payment type | One-off lump sum on diagnosis of a covered condition | Regular monthly payments while unable to work |
Covered conditions | Specific serious illnesses (e.g., cancer, heart attack, stroke) | Broad range of conditions, including physical injury, mental health issues, and long-term sickness |
Duration of payments | Policy usually ends after full payout | Payments continue until return to work, retirement, or end of policy term |
Purpose | Covers large, one-off financial needs like debts or treatment costs | Replaces ongoing income to cover everyday living expenses |
Amount of claims | Usually only claimed on once for the full balance Smaller claims could be made as according to your policy’s terms & conditions | Can be claimed on multiple times within the policy term |
Best suited for | People wanting a financial safety net for major life-changing events | People who rely on salary, self-employed workers, or those without employer sick pay |
About the author
Rebecca Weedon
Rebecca has been with Cavendish Online for almost three years. She has experience with giving advice and providing guidance around policies to help customers make an informed decision.
Her favourite thing is to find cover for those who think they might be 'uninsurable' - there are options for everyone!
