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What’s the difference between critical illness cover and life insurance?

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?

Life insurance

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

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.

Could I get both?

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.

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Pension Term Assurance

Until the end of 2006, pension term assurance was available as a form of life insurance that could be bought as part of a pension plan complete with the associated tax breaks.While this kind of policy is no longer available to new customers, those with such policies active are still entitled to continue them, and to enjoy the tax advantages they come with.

Life Insurance Jargon Buster

If you have a family and financial responsibilities, you’ll likely want to take out a life insurance policy. A good life insurance policy can affordably provide you with peace of mind during your life and offer your survivors financial support after your death.But even if you’re familiar with the basic premise of life insurance—premiums paid monthly for a lump sum payment or income following your death—you may find the process of seeking out a specific policy daunting. There are a range of life insurance products available, covering different eventualities and offering different levels and types of payout. But if you’re not familiar with the lingo used by insurers, these differences can be opaque. At worst, you can find yourself sold - and now paying premiums for - a policy that doesn’t suit your needs.In general, the better informed about the insurance market you are, and the more policies you compare in your search, the more likely you are the find the right life insurance policy for your personal and financial needs.The following glossary of terms you might encounter in your life insurance search and the types of policies available can help demystify the process.

Types of Life Insurance

Life insurance is an essential financial product that provides security and peace of mind for individuals and their families. Understanding the various life insurance types available in the UK can help you choose the right life insurance policy to meet your needs. This guide explores different life insurance policies, their benefits, and how they can provide financial protection for your loved ones.