Why cover?
  • affects 1 in 4 women / 1 in 5 men before retirement
  • 94.1% of the critical illness claims are paid
  • protect yourself and your family if you get seriously ill
Why us?
  • get the cover that will pay when you need it
  • save up to 35%, cover from £5 a month
  • free, fast and without obligation quotes
Insurers: Aviva, Legal & General, Liverpool Victoria, Scottish Widows, Vitality, Zurich

Critical Illness vs. Disability insurance: What are the differences?

Both insurance plans provide a level of protection against the financial losses brought about by sickness. However, disability insurance and critical illness insurance are not the same. In a nutshell, disability insurance gives you a monthly benefit in the event that you are disabled while critical illness insurance gives you a lump sum payment when you are diagnosed with a covered serious illness.

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Living with Disability

  • More than 11 million people in the UK have a limiting long term illness, impairment or disability.
  • Based on a Before Housing Costs basis, 20% of individuals in families with at least one disabled member are living in relative income poverty.
  • The poverty rate for disabled adults in the UK is 30% - twice that for non-disabled adults.

Source: Office for Disability Issues 2010/11 Disability factsheet

Disability Insurance: Protecting Your Biggest Asset

One’s ability to earn an income is probably the biggest asset for most people, since one’s income is primarily the source of all other assets – his home, his children’s education and investments. If you are a breadwinner, protecting this asset becomes all the more important since there are other people who are relying on you.

Life can throw a curveball – an accident or a prolonged illness can result in your inability to do any work, as well as perform your day-to-day activities. Because of this, your family will suffer from the loss of income, as well as the expenses that being disabled entails. The hospital bills and the need to hire someone to help with day-to-day activities can put a considerable dent on one’s finances. What’s more, a family member may have to stop working in order to act as the disabled person’s carer.

Disability insurance can help by protecting your income. With this, you can receive a replacement for your income.

Government Assistance Can Only Do So Much

The current state-sponsored health care program provides some benefits to help disabled persons with their finances. The usual benefits a disabled can claim would be disability living allowance, as well as an allowance for the disabled person’s carer.

Disability Living Allowance may be payable if:

  • You have a mental or physical disability that prevents you from caring for yourself or causes problems in walking
  • You are below 65 during the time of the claim
  • If you are above 65 years old, Attendance Allowance may be the benefit for you

Although state benefits can help, it may not guarantee that you and your family will be able to maintain your current standard of living. It may not also ensure that your assets are protected – you may need to sell these assets to help fund disability-related expenses.

Weighing the Differences: Critical Illness Cover Vs. Disability Insurance

Below, a table further outlines the differences (and similarities) of the two:

  Disability Insurance Critical Illness Insurance

Monthly payments while the Insured is disabled, subject to a maximum number of months, as well as to a maximum percentage of the current income.

Once the Insured recovers or has other sources of income, the benefits may stop or be reduced.

Payment is given as a lump sum once the Insured is diagnosed with a critical illness.

Payment is not connected with the person’s ability to work. He may be able to continue with his work while he is diagnosed with the covered illness.

Waiting period

There is a waiting period from the time the person is unable to work.

There is a waiting period from the date of diagnosis. The Insured must survive this waiting period for the claims to be payable.

Reasons for the claims to be payable

It depends on the type of disability policy. There are various definitions:

  • Any occupation, where the person is unable to find employment for any kind of work. If one can find other areas of employment, the claim won’t be payable. (i.e. A professional tennis player may be injured but the disability does not prevent him from performing standard work – his disability is not payable under this policy.)
  • Regular occupation – total disability is defined as the inability to perform any ordinary occupation due to a medical condition.
  • Own occupation – total disability is defined as the inability to perform one’s occupation.

Payment is upon diagnosis of a critical illness. Some of the illnesses are:

  • Alzheimer’s disease
  • Heart attack
  • Major stroke
  • Brain tumour
  • Total blindness, deafness or muteness
  • Major organ transplant
  • Cancer
  • HIV
  • Kidney failure
  • Coma
  • Multiple Sclerosis
  • Parkinson’s disease
  • Paralysis or loss of one or more limb
  • Motor Neurone Disease
  • Third degree burns
  • Traumatic head injury
Length of coverage

Coverage is usually at age 65. At retirement age, retirement benefits are expected to kick in.

Cover can be until age 75 or even above. But this cover stops once a lump sum payment is made.


If premiums are paid by an employer, monthly benefits are subject to tax. If premiums are paid by the Insured, no taxes are charged.

This is usually tax-free.
Premium refunds

Partial refunds given if the benefits are not paid.

All premiums paid back if there is no claim (i.e. the Insured dies before making any claim).

Pros and Cons of Disability vs. Critical Illness Protection

If you are considering whether you need disability insurance or critical illness protection, here are some pros and cons of each:

  Disability Insurance Critical Illness Insurance
  • Provides long term income even if you are disabled and cannot work anymore.
  • Benefits are tax-free.
  • Payouts continue for as long as you are disabled (until the policy reaches maximum number of months payable – you can choose from 24 months, 60 months or even a lifetime income protection cover).
  • Some providers even provide a “recovery benefit” or recovery assistance.
  • Provides a lump sum upon the diagnosis of a serious illness
  • Some policies also define permanent disability as a critical illness.
  • Benefits are tax-free.
  • The claimant is free to spend the money however he sees fit.
  • The lump sum can be big enough to cover treatment or pay off a mortgage.
  • The amount of cover is selected not based on current income but on your choice of benefit amount.
  • You can still be able to work after making a claim.
  • Some policies provide partial payments for some illnesses.
  • Disability benefits may stop once you are able to go back to work.
  • Disability benefits will be based on your current income or a percentage of it, additional expenses related to the disability may have to be taken from your savings or from other sources.
  • Depending on the waiting period selected, the income benefits may only kick in after a specified number of months.
  • If you choose a “regular occupation” coverage, you may not be able to claim if you are still able to perform another job other than your current occupation.
  • Income benefit may not be enough when you consider inflation. You can think about getting an inflation rider.
  • Premiums can be higher as compared to disability insurance.
  • You need to meet the definition of the critical illness being claimed against for critical illness claim to be payable.

Want to know about other health-related insurance covers? Here are some to think about:

For more information on protecting your income, read the Income Protection Insurance article.

Last updated on: 18.1.2013

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