Critical Illness Insurance vs. Income Protection Insurance

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If you suddenly become ill, you might not be able to work either temporarily or permanently. This means no income to bring home, both for you and your family. Unless you have some sort of gold mine in your lot, living day after day could be a challenge. You might not have enough source of cash to pay for the bills, the rent or mortgage, or to buy your necessities. If losing your job means struggling to live, then what you need is insurance to protect yourself from this happening.

There are two types of insurances which are designed for this purpose, namely the critical illness insurance and income protection insurance. Although both provide financial support if you become ill and unable to work, there are some differences between the two to help you distinguish which of them could be a better option for you.


With critical illness insurance, only critical illnesses specified in the policy might qualify for a payout, and some of these illnesses should be severe enough. Meanwhile, with income protection insurance, most illnesses that could prevent you from working can qualify you for a payout.


With critical illness insurance, you can usually claim a single lump sum payment, while with income protection insurance, you can get regular payments.

Number of claims

With critical illness insurance, you can only claim once, usually paid as a lump sum payment amounting to the total amount of cover. On the other hand, with income protection insurance, you can claim as many times as you need during the policy term.

Tax- Free Payments

Both insurances provide tax- free benefits, unless in the case of employer scheme income protection insurance, wherein your payments will be taxed normally.

Payout Calculation

Unlike critical illness wherein you are insured for a certain amount which can be paid out anytime during the policy, payments with income protection are calculated based on your earnings, typically at 50%-65% of your monthly income.

What’€™s Not Covered?

Both policies do not cover illnesses related to pregnancy or alcohol and drug use, as well as pre- existing medical conditions.


Critical Illness

  • The amount of cover is not linked to your income so you can choose any amount you want
  • You can claim big enough lump sum to pay off your loans, mortgage, other debts, etc.

Income Protection

  • May be useful if you are self- employed who do not benefit from company sick leaves.
  • Can be cost effective in the long run, since it could potentially pay out for many years.


Critical Illness

  • Can be very expensive if you like to cover certain illnesses and disabilities.
  • Usually very difficult to understand with some exclusions which are not fully explained.

Income Protection

  • Can have very costly premiums if you increase the time before you can get paid out.
  • You have to inform the company immediately if you changed jobs, and might as well restrict your policy to your current occupation to determine whether they can have effects on your premium.

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