Life Insurance, Critical Illness or Income Protection?
Protection is the part of a mortgage appointment people brace themselves for. Partly because the products have interchangeable-sounding names, and partly because nobody enjoys the subject.
So here's what each one does, in plain terms, and what to do first if you're only going to do one thing.
Life cover
Pays out if you die during the term of the policy. Most policies also pay out early on a terminal diagnosis.
It comes in two main shapes. Level cover keeps the same sum insured throughout, which suits people who want a fixed amount for a family to live on. Decreasing cover reduces roughly in line with a repayment mortgage, which makes it cheaper and is designed to clear the loan.
Of the three, it's the cheapest, because the thing it insures against (death) is the least likely to happen during a normal working life.
Critical illness cover
Pays a tax-free lump sum if you're diagnosed with one of the conditions listed in the policy, and your diagnosis meets that policy's definition of it.
Both halves of that sentence matter. Policies don't cover every illness, and two insurers can use different definitions of the same condition, so one may pay on a diagnosis where another doesn't. This is the product where the wording matters far more than the price, and it's where advice is. Comparing two critical illness policies on premium alone tells you almost nothing.
It's the most expensive of the three, because a serious illness during your working life is considerably more likely than dying during it.
Income protection
Pays you a monthly income if illness or injury stops you working, and keeps paying until you go back to work, the policy term ends, or you retire, depending on the type you choose.
The main lever on cost is the deferred period, which is how long you wait after stopping work before payments start. Common options are 4, 8, 13, 26 or 52 weeks. Matching the deferred period to however long your employer's sick pay lasts is usually the sensible way to set it, and it brings the premium down substantially.
"I've already got it through work"
Worth checking what that actually means.
Death in service is typically three or four times salary. It's genuinely valuable, and it ends the day your employment does. It doesn't follow you to your next job, and it's not there if you're between jobs or you go self-employed.
Employer sick pay is the one people overestimate most. Some employers pay full salary for six months. Plenty pay nothing beyond the statutory minimum. Statutory Sick Pay is £123.25 a week for the 2026/27 tax year, and since April 2026 it's paid from the first day of sickness rather than the fourth.
That's around £534 a month. Compare it to your mortgage payment and other bills, and you'll have your answer about whether you need anything else.
Which to sort out first
For most working people, income protection. Your income is the thing that pays the mortgage, the bills and everything else, and being unable to work is far more likely than dying. It's the risk people insure last and should probably insure first.
Then life cover if anyone depends on your income, particularly with a mortgage and children.
Then critical illness, if the budget stretches. Or a smaller amount of critical illness alongside income protection, which is often the better-value combination.
That's the general order, not a recommendation for you. Which of these makes sense depends on your job, your sick pay, your savings, your debts and who relies on you.
Do these policies actually pay out?
This is the objection I hear most, and it's a fair one to raise.
The Association of British Insurers publishes the figures every year. In 2025, insurers paid 97.9% of individual protection claims, and is has stayed at or above that level for more than a decade. Across individual and group policies together, £7.84 billion was paid out that year, around £21.5 million a day.
Where claims fail, it's usually one of two things: the condition didn't meet the policy definition, or something wasn't disclosed on the application. The second is avoidable, and it's a large part of what you're paying an adviser to get right. Disclose everything, including things you think are irrelevant. An accepted policy with a slightly higher premium is worth far more than a cheap one that gets queried at claim.
One thing worth knowing about trusts
Life cover written in trust generally pays out faster, because it doesn't wait for probate, and usually falls outside your estate for inheritance tax. It normally costs nothing to set up at the point of application. It's one of the easiest wins in the whole of financial planning and it's routinely skipped.
Where I come in
I'm independent, so I look across the market rather than one insurer's range. With protection that matters more than it does with mortgages, because the differences between insurers sit in the definitions and the underwriting rather than in the headline price.
Life Assurance plans typically have no cash in value at any time and cover will cease at the end of term. If premiums stop, then cover will lapse. Terms and Conditions apply.
Critical Illness plans typically have no cash in value at any time and cover will cease at the end of term. If premiums stop, then cover will lapse. Plans may not cover all the definitions of a critical illness. Terms and Conditions apply.
Income Protection policies typically have no cash in value at any time and cover will cease at the end of term. If premiums stop, then cover will lapse. The payment of any benefits may affect any claim to means tested state benefits. Terms, conditions and exclusions apply.
The Financial Conduct Authority does not regulate trusts or estate planning.