What’s the Difference Between Life Insurance, Critical Illness Cover and Income Protection?

What does life insurance cover?

Life insurance is designed to pay out if the person covered dies during the term of the policy, subject to the policy’s terms and conditions.

The money could help your family with financial commitments such as the mortgage, household bills and other living costs.

You can choose how much cover you need and how long you want the policy to last.

What is critical illness cover?

Critical illness cover is designed to pay out if you’re diagnosed with one of the serious illnesses specified by your policy and meet the insurer’s definition of that condition.

Unlike life insurance, the payment can be made while you’re still alive.

The lump sum could be used to help repay a mortgage, cover household expenses or provide additional financial support while you undergo treatment or recover.

The illnesses covered and their definitions vary between insurers, so it’s important to understand exactly what a policy covers.

What is income protection insurance?

Income protection is designed to provide a regular replacement income if you’re unable to work because of illness or injury and meet the terms of your policy.

Rather than receiving one large lump sum, you can receive regular payments representing a proportion of your income.

Policies normally have a waiting period before payments begin and can differ in how long they’ll continue paying benefits.

Do I need life insurance if I have a mortgage?

Life insurance isn’t generally a legal requirement for getting a mortgage, but many homeowners choose to have cover in place.

If you have a partner, children or other people who rely on you financially, life insurance could help them repay the mortgage or meet other financial commitments if you die.

The appropriate amount and type of cover will depend on your individual circumstances.

Can I have life insurance, critical illness cover and income protection together?

Yes. The three types of insurance protect against different circumstances, so they can be used alongside each other.

For example, life insurance could provide financial support for your family if you die, critical illness cover could provide a lump sum following diagnosis of a specified serious illness, and income protection could provide regular payments if illness or injury prevents you from working.

You don’t necessarily need all three. The right combination will depend on your financial commitments, employment benefits, savings, family circumstances and budget.

How much protection cover do I need?

There’s no single amount that’s right for everyone.

When considering protection, it can be useful to look at your mortgage and other debts, monthly household expenditure, existing savings, workplace benefits and how your household finances would be affected if your income stopped.

You should also consider how long you’d want financial support to continue and what cover you may already have through your employer.

Can an insurance adviser help me choose the right cover?

An insurance adviser can look at your circumstances and help you understand the differences between the types of protection available.

They can also compare policies from different insurers, including their costs, features, exclusions and definitions, rather than simply comparing the headline monthly premium.

At GHL Direct, our advisers can help you understand your life insurance, critical illness and income protection options and find cover appropriate for your circumstances.

Want to protect yourself and your family? Speak to an insurance adviser and compare your protection options.