Critical illness vs income protection — what's the difference?
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In short. Critical illness cover pays a tax-free lump sum if you're diagnosed with one of the specific illnesses listed in the policy. Income protection pays a monthly tax-free income if illness or injury stops you working, until you can work again (or up to a set age).
Both are forms of protection insurance. They answer different questions: 'what if I get a serious illness and need a lump sum?' versus 'what if I can't work and need an ongoing income?'.
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Side by side
Payout type
Critical illness cover
Lump sum
Income protection
Monthly income (typically up to 60–70% of salary)
Trigger
Critical illness cover
Diagnosis of a listed condition (e.g. cancer, heart attack, stroke)
Income protection
Inability to work due to illness or injury, after a deferred period
Payout duration
Critical illness cover
One-off
Income protection
Until return to work, end of claim limit, or retirement age
Deferred period
Critical illness cover
Usually none
Income protection
Typically 4–52 weeks; longer deferred period = lower premium
Conditions covered
Critical illness cover
Defined list (varies by insurer; ABI uses standard definitions)
Income protection
Any illness/injury that meets the policy's incapacity definition
Tax on payout
Critical illness cover
Tax-free (for individuals)
Income protection
Tax-free (for individuals)
Typical use
Critical illness cover
Clear mortgage or major costs after a serious diagnosis
Income protection
Replace income for the period you can't work
When Critical illness cover usually wins
- You want a lump sum to clear debts after a serious diagnosis
- You have employer-provided sick pay covering shorter-term issues
- You want predictable, defined-event cover
- You want to combine it with life cover for simplicity
When Income protection usually wins
- Your household relies on your income
- You have limited sick pay (especially self-employed)
- You want broader cover for any illness or injury that stops you working
- You want long-term income replacement, not just a lump sum
Related quick answers
FAQ
- Can I have both?
- Yes — many people combine income protection (regular income) with critical illness cover (lump sum) for different needs. Affordability is the main constraint.
- Why is income protection often considered more important for the self-employed?
- Because there's no employer sick pay — Statutory Sick Pay generally doesn't apply to the self-employed, so income protection fills the gap.
- Does critical illness pay out for every cancer?
- Most policies pay out for the most common 'in situ' and invasive cancers under defined criteria, but very early-stage or non-life-threatening cancers may pay a lower amount or nothing. Read the conditions list carefully.