When planning for financial security, especially in terms of protection, it’s very important to understand the various products available. We’ve talked before about Income Protection but a question we are often asked is how is it different to Serious Illness cover. Both products are designed to provide financial support during challenging times but they serve different purposes and operate in distinct ways. Here’s a closer look at what sets them apart.
Serious Illness Cover is designed to provide a lump sum payment if you are diagnosed with a specified serious illness. This is designed to help cover the immediate financial impact of a serious health condition, such as cancer, heart attack or stroke. The illnesses covered are specified in the policy at outset and it’s crucial to understand what conditions are included and in some cases the specific criteria around them.
Income Protection on the other hand is designed to replace a portion of your income if you are unable to work due to illness or injury. This regular payment helps to ensure that you can continue to meet your financial outgoings such as mortgage payments and daily living expenses, while you recover. Income Protection covers a broader range of illnesses and injuries and not just a specific list.
There are also a number of other key differences in the way the products are taxed and pay out. The table below summarises these.
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As you can see from the above, there are some very important key differences between the two products. Combine these with your own requirements and you’ll see that there are many factors to be considered. Some individuals may opt for Serious Illness Cover for its immediate, flexible financial support, while others might prefer Income Protection for its continuous income replacement.
Each product suits different needs and that’s where we can help you decide what’s best for your individual circumstances. At Searing Point Wealth Management, we’d be delighted to help you understand which suits your individual circumstances the best. Just contact us to arrange a suitable appointment.
