Life insurance and critical illness cover: What’s the difference?

January 29, 2022

None of us know what’s around the corner which is why we put insurance in place to protect ourselves, such as travel insurance and home contents insurance. But you can also put cover in place to protect you or your family if the worst happens and this is where life insurance and critical illness cover come in. This article explains what life insurance and critical illness cover are, the differences between them and why they’re important.

Are life insurance and critical illness cover the same?

No. When you take out life insurance, the policy will pay out a lump sum if you pass away during the term*. Whereas, critical illness cover is designed to offer protection if you’re diagnosed with certain specified illnesses during the term. In the event of a successful claim, you’ll receive a lump sum on the diagnosis.

How are life insurance and critical illness cover similar?

Life insurance and critical illness cover are similar in some ways:

  • They both pay out a tax-free lump sum in the event of a successful claim. However, with life insurance you may opt take out ‘Family Income Benefit’; this is a type of life insurance that pays out a fixed amount in monthly or quarterly intervals from when the person dies until the end of the policy, rather than a lump sum.
  • When you take out both types of policies you’ll need to give details about your lifestyle and health and this will have a bearing on how much you’ll pay on your premiums and whether you’ll be accepted.
  • There are no restrictions on what you can spend the money on.

How are they different?

They each protect you against different events. So with life insurance, the purpose is to protect your loved ones financially if you die. Whereas, critical illness cover is to protect you if you are diagnosed with a specified illness. This allows you to cover life’s essentials during your recovery and you may wish to spend some of the money on health-related costs too. However, the financial support from critical illness cover will naturally help support your family too.

Can I have life insurance and critical illness cover at the same time?

Yes! You can absolutely take out both policies and many people do in order to protect themselves.

Life insurance or critical illness cover: Which should I get?

The good news is, life insurance and critical illness cover may be much cheaper than you think so you may wish to take out both. When it comes to choosing the right cover for your needs, the best thing to do is get expert advice. If you speak to one of our expert protection advisers, they’ll run through your circumstances. For example, they’ll ask you how much, if any, sick pay you’re entitled to from your employer when discussing your critical illness cover needs. And with life insurance, they’ll ask if you already have any cover in place such as a ‘death in service’ benefit from your employer too.

This will help build a picture of how you or your family would cope financially in the event of your serious illness or death. And also what level of protection may be right for you. And if you do want to take out only one policy, you’ll be able to see which may be the right option for you too.

If you would like to find out more about life insurance and critical illness cover please don’t hesitate to get in touch. Our advisers are specialists in protection and are happy to answer any questions you may have. So call us on 01275 877997 or click here to arrange a call back.

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