Income Protection vs Critical Illness Cover: Why More Brits Are Choosing Monthly Protection
In an era where financial security feels increasingly precious, there’s a quiet revolution happening in how we protect our income. The latest figures from the Association of British Insurers (ABI) reveal a fascinating shift in how British households are approaching their financial safety nets – and we’re here to break down what this means for you.
The Numbers Tell a Story
2023 saw a record-breaking surge in income protection insurance, with an impressive 247,000 new individual policies taken out. That’s a 16% jump from 2022! Meanwhile, traditional critical illness cover sales reached 75,700 – showing that while both types of protection are growing in popularity, income protection is leading the charge.
Why the Shift to Income Protection?
The answer lies in how these two types of cover work for you:
Income Protection: Your Monthly Safety Net
Think of income protection as your financial understudy – ready to step in and keep the show running if you can’t work due to illness or injury. It typically covers up to 75% of your salary, kicking in after your sick pay ends. The best part? It keeps paying as long as you need it (within your policy terms).
Critical Illness Cover: The Lump Sum Approach
Critical illness cover works differently – it provides a one-off payment if you’re diagnosed with a specific serious condition like cancer or suffer a stroke. While this lump sum can be invaluable, many people are discovering that monthly income protection better matches their regular outgoings.
Flexibility: The Game-Changer
One of the most attractive features of modern income protection policies is their flexibility. You can choose between:
- Full-term protection: Coverage that lasts until retirement
- Short-term protection: More affordable 1-2 year coverage periods
- Multiple claim periods: Protection that resets if you need to claim again
This flexibility means you can tailor your protection to both your needs and your budget – something that’s particularly appealing in today’s economic climate.
Expert Insight
As Yvonne Braun, Director of Policy at the ABI, puts it: “Financial resilience – the ability to withstand a financial shock – is a hugely important issue.” We couldn’t agree more. The growing popularity of income protection suggests that more people are thinking strategically about how they’d manage their monthly commitments if they couldn’t work.
Making Your Choice
While both income protection and critical illness cover serve important purposes, the right choice depends on your personal circumstances. Consider:
- Your employer’s sick pay policy
- Your monthly outgoings and savings buffer
- Whether you’d prefer regular payments or a lump sum
- Your budget for protection
- Your family’s specific needs
Your Next Steps
Understanding protection insurance options can feel overwhelming – but that’s exactly why we’re here. At Dwello, we can help you explore both income protection and critical illness cover, explaining how they could work for your specific situation.
The information contained in this article does not constitute financial or mortgage advice from Dwello Mortgages. It is provided for general informational and educational purposes only. No information contained constitutes a solicitation, recommendation, endorsement or offer by Dwello.
Dwello is not making any representations or warranties, and assumes no liability, for the content provided in this article, including any third party information. Consumers should always consult their own financial advisors before making any mortgage or remortgage decisions based on this type of general market commentary and analysis.
All mortgage pricing, rate scenarios and cost comparisons used are hypothetical examples. Actual rates, fees and mortgage costs may vary based on the specific lender and the individual borrower’s personal financial circumstances.
Dwello Mortgages, a trading style of Dwello Mortgages Limited is an appointed representative of HL Partnership Limited which is authorised and regulated by the Financial Conduct Authority. Dwello Mortgages Limited is registered in England and Wales with company number 14432864. Registered Office: St James House, Hollinswood Road, Telford TF2 9TW
