Life Insurance vs Income Protection

In an ever-changing world, having a safety net is more important than ever. Thankfully, there are a range of financial products at your disposal.

Life insurance and income protection are both designed to provide support to your family/loved ones in times of need. However, they both work in different ways.

We'll explore the key differences between these types of protection and which option may be best for you.

What is life insurance?

Life insurance provides a lump-sum payment to family and/or loved ones upon your death.

It can be ideal for protecting any dependants who rely on your income to get by. The main purpose of life insurance is to ensure that your loved ones are financially supported after you’re gone.

There are two main types of cover:

• Term life insurance: This policy provides cover for a set period of time (usually between 5-50 years). If you pass away during this term, your insurer pays out a lump sum. If not, the policy expires.
   

• Whole life insurance: Also known as ‘life assurance’. Unlike term insurance, whole life insurance offers cover for the insured's entire lifetime, as long as premiums are paid. 

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.

What is income protection insurance?

Income protection insurance is another type of cover that provides financial support to you if you are unable to work due to illness, injury, or disability.

Instead of providing a lump-sum payment, it pays out a percentage of your income (typically 50-70%) on a monthly basis for a set period or until you return to work.

This type of insurance is particularly useful for those who may not have enough savings set aside to cover their living expenses during difficult times or for those working in occupations where the risk of illness or injury is higher.

There are a few types of income protection policies available:

• Short-term income protection: Designed for those with temporary work absences, such as injuries or illness that do not require long recovery times. It can provide a portion of your income during the recovery period, helping you cover essential expenses like mortgage payments and bills.
   

• Long-term income protection: Offers cover for extended periods, sometimes until retirement age. These policies are ideal if you are concerned about significant health issues that could lead to a lengthy absence from work.

What is the difference between life insurance and income protection?

The main difference between life insurance and income protection is in the way they provide financial support and the circumstances under which they pay out.

Life insurance pays out when you die, whereas income protection acts as a replacement of your regular income if you are unable to work.

The same can be said for the payout structure. Life insurance is paid out as a lump sum of which your family/loved ones can use as they see fit — whether to cover debts, living expenses, funeral costs, or any other obligations left behind.

Income protection, however, pays out as a percentage of your income, typically on a monthly basis, providing ongoing support to you during your recovery period or until you're able to return to work.

This income can help you and your loved ones maintain their standard of living, settle monthly bills, and manage daily expenses.

Can you get life insurance and income protection together?

Yes, you can get life insurance and income protection together. Many people choose to do so for added financial protection.

It may cost more in premiums each month but you will have the benefit of being protected in either scenario.

Which policy is right for me?

Ultimately it depends on your preferences and financial situation. If you want outright protection in the event of your death, life cover is often the go-to choice.

However, if you are worried about suffering from an illness or injury that could seriously harm your ability to earn a living, income protection may be more suitable for you.

Some people choose to have both life insurance and income protection, as they serve different purposes and can provide greater cover for you and your family.

Route 3

Recommended for those with medical disclosures or hazardous occupations, we can help you find the most suitable and affordable policy to suit your needs.

Select this route if you:

• Would like an adviser to recommend the right life insurance policy for you
   
• Currently have or previously have had a medical condition/s whether well managed or not
   
• Currently have or plan to take up a dangerous occupation or hobby

You can call our advised team on

01392 436193 

(Monday to Thursday 9am – 5.30pm, Friday 9am – 5pm)

How can I buy income protection insurance through Cavendish Online?

You can quote and apply for income protection by speaking to one of our expert protection advisers over the phone. There are no upfront fees to speak to the team and receive a quote. Simply call the Cavendish Online team today on

01392 436193 (Monday to Thursday 9am – 5.30pm, Friday 9am – 5pm)

Unlike standard life insurance policies, income protection is a more complex product. To ensure you receive the most suitable cover for your needs, we believe the best way to buy income protection is by speaking with our experienced advisers.

Our team will guide you through the entire process, from providing a tailored quote to completing your application and beyond.