Many people choose to leave something for loved ones should something happen to them. However, there are many ways to do this, with different products offering protection in different circumstances.
Two of the more popular ones are life insurance and critical illness cover. While they are in some ways similar, there are key differences you need to understand if you’re considering either. So, what are the differences exactly?
A life insurance policy pays cash to a beneficiary should you die while you are under contract. This money can then be used for almost anything.
Generally, it is either used to ensure that financial obligations like mortgages can be paid or to provide financial assistance due to a loss of income. However, the downside to life insurance is that it only pays out if you die, without any provision for loss of income while you are alive.
Critical illness cover, on the other hand, will pay a cash lump sum if you fall foul of any of the illnesses included on your policy. Much like life insurance, the cash can be used for anything and is often used to replace lost earnings as a result of being unable to work.
Some policies can include clauses that cover terminal illness diagnoses, such as if you are given a set amount of time to live. However, they will not pay out anymore when you die.
There is nothing stopping you from having both critical illness cover and life insurance. Some insurers may offer the different types of the cover into one integrated package, which may allow you to get a better rate than having them separately. However, this isn’t a given, so it’s always worth checking what’s on the market first.
We endeavour to keep our users fully informed when it comes to making a purchasing decision. Please read through our handy guides to find the information you need.