Income protection or critical illness cover: two very different answers to the same worry
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For a lot of people the cash ISA is the financial equivalent of a good umbrella. It is not exciting, you do not think about it much, and it has done the job every year without complaint, and is there for a rainy-day. Money goes in, the interest is tax-free, and that is the end of the matter. From April 2027 that quiet arrangement changes for most savers, and it is worth understanding now rather than discovering it in a letter from your provider.
The headline is straightforward. From 6 April 2027 the amount you can pay into a cash ISA each tax year falls to £12,000 if you are under 65. Your overall ISA allowance stays at £20,000, so nothing is being taken away from the totaThese two policies get muddled up more than almost anything else we discuss. People come in believing they have income protection and find they hold critical illness cover, or the other way around, and sometimes they are paying for one while worrying about the risk that only the other one covers. It is an easy mix-up, because at a glance they answer the same question. What happens to us if I get ill?
They answer it very differently, though, and the difference matters most at exactly the wrong moment. One replaces your income month by month while you cannot work. The other pays a single lump sum if you are diagnosed with a condition the policy specifically lists. Neither is a substitute for the other.
The floor you are standing on already
Start with what you would actually receive without either policy, because that is what makes the rest of the conversation concrete. If you are employed, statutory sick pay for the 2026/27 tax year is £123.25 a week, or 80 per cent of your average weekly earnings if that is lower, and it runs for a maximum of 28 weeks. Since April 2026 it is paid from the first full day of absence rather than the fourth. Many employers do better than that through a contractual sick pay scheme, often full pay for a period and then half pay, but the terms vary enormously and plenty of people have never checked theirs. If you are self-employed, statutory sick pay does not apply to you at all.
So the honest question is not really which policy is better. It is how long your household could keep going on whatever your employer provides if applicable, and what happens after that point.
What each one actually does
Income protection pays a regular monthly benefit if illness or injury stops you working, and it keeps paying while you remain unable to work, up to the end of the policy term. It does not start straight away. You choose a deferred period first, and a longer wait usually means a lower premium, which is why it is worth lining that up with how long your sick pay lasts. Insurers also cap the benefit at a proportion of your earnings rather than replacing them in full, deliberately, so that returning to work still makes sense financially. The definition of incapacity matters more than most people realise: cover based on your own occupation is stronger than cover that only pays if you cannot do any suitable job. Some cheaper policies pay for a limited period, perhaps a year or two, rather than for as long as the illness lasts.
Critical illness cover works on a completely different trigger. It pays a lump sum on diagnosis of one of the conditions listed in the policy, provided the diagnosis meets the definition written into the contract. That last part is where the disappointment usually lives. Definitions are drafted by severity, so a condition can be serious, frightening and genuinely life-changing and may still not meet the threshold, or may attract only a partial payment. Once the lump sum is paid, the cover generally ends. On the other hand, it pays whether or not you stop working, which income protection does not.
Take Eleanor, aged forty-four, a fictional client whose position is very common. She is employed, gets three months of full company sick pay, and has a mortgage with around twelve years left to run. For her, the two policies solve separate problems. A lump sum could clear a chunk of the mortgage or pay for adaptations and treatment costs, but it would not keep paying the bills for the following four years if she were off work that long. A monthly benefit would cover the bills, but would not hand her the capital to deal with a one-off cost. She has to decide which risk keeps her awake, and what she can comfortably afford to insure against, rather than assume one policy does both jobs.
The things that apply to both
Whichever route appeals, some realities are shared. Both are medically underwritten, so your health history and occupation affect what you are offered and what is excluded, and answering the medical questions fully is not optional. Premiums may be guaranteed for the term or reviewable, and reviewable premiums can rise. Cover stops if you stop paying. And the cost of both rises with age, which is the unsentimental reason these policies are cheaper to arrange in your thirties than in your fifties.
A few questions usually settle the shape of the conversation:
• What sick pay you actually get, and for how long, in writing rather than from memory
• How many months your household could manage before something had to change
• Whether the bigger worry is a one-off cost or the monthly bills continuing
• What you can afford to pay every month for years, since cover you cancel protects nobody
There is no universally right answer here, and the sensible mix depends on your job, your household and your budget. What is worth avoiding is the assumption that having something in place means having the right thing in place. Digging out what you already hold, including anything provided through work, is usually the most useful hour you can spend on this.
In summary
Income protection replaces income month by month while you cannot work. Critical illness cover pays a lump sum if you are diagnosed with a listed condition that meets the policy definition. They protect against different things, they can disappoint in different ways, and the starting point for both is knowing exactly what your sick pay would give you and for how long.
If you are not certain what cover you have, or whether it protects the thing you are actually worried about, we would be happy to go through it with you. Speak to the ACJ team and we can look at what you hold already, including anything from your employer, and talk through where the gaps are.