Critical Illness insurance vs. Income Protection insurance: What are the differences?
Critical Illness Insurance and Income Protection Insurance have a similarity – they provide an amount of money when you get sick of a certain disease. They are also similar in that the payments will be made to the Insured and they give the Insured the freedom and flexibility to decide how the money will be spent.
However, the similarities end there. Critical illness insurance or critical illness cover will provide the sum insured (a lump sum paid tax-free) when the person insured is diagnosed of a critical illness. Meanwhile, income protection cover will provide you payment in the event that you cannot work due to a covered disability or illness.
To illustrate the differences between the two, below is a table outlining these:
| Critical Illness Cover | Income Protection Cover | |
|---|---|---|
| Cause | This will pay upon diagnosis of a covered critical illness. This is no way connected with your ability to work. You may actually continue working even as you get a claim from critical illness insurance. | This will pay if you are not able to work as a result of a disability (you get totally and permanently blind or lose the use of a limb) or a critical illness. |
| Mode of payment | One-time payment of a lump sum. | Monthly, for a limited number of months (usually 6 to 12 months, depending on the kind of policy you have). This provides a continuing income until the person has recovered or has found alternative sources of income. |
| Payment for disability | This coverage will also pay when the Insured is declared disabled, but the disability must be total and permanent, meaning there is no chance for recovery. | This will pay for disability as long as it prevents you from working and earning an income. |
| Amount of payment | This pays for the full amount. | This pays up to a certain percent of your gross monthly income, subject to the policy’s maximum limits. The benefits are usually set at 65% up to 80% of your income. |
| Types of illnesses | The policy will have a list of critical illnesses covered. Any illnesses not included in the list will not be considered payable. | The policy will pay when the illness or injury prevents the Insured from working. This means that it covers practically any medical condition, as long as you cannot work due to the condition. |
| Termination of the policy | After the lump sum payment is made, the policy ceases to be effective. | The Insured can have multiple claims for different conditions, as long as the policy is kept in force. |
| Joint policies? | This can be bought together with a life insurance policy. | This is taken as a separate policy. |
Recommended useful information to read:
- Are you at risk? Critical Illnesses you may be susceptible to
- Things to consider before getting a critical illness insurance policy
- What you should know about Your Critical Illness Cover: The exclusions to your policy
- Save Up on Premiums: factors that affect Your Critical Illness Insurance premiums
- Dos and Don’ts When Making Critical Illness Insurance Claims
