The world of insurance is complicated and one thing that causes more confusion than any other is the difference between the different types of cover.

One that springs to mind is the difference between income protection and critical illness insurance.

At first glance you’d be forgiven for thinking that they do the same thing i.e. provide insurance in case you are not able to work because of illness.

But there are crucial differences and it is worth investigating which cover is best for you, based on your needs.

On the face of it, both are there to provide you with money if you are unable to work because of sickness or injury, you can use the payout however you see fit and you can have both with guaranteed or fixed premiums. But that is just about where the similarity ends.

Income protection is, as the name suggests, a policy you can take out to cover your earnings if you are unable to work. It’s a long-term insurance which pays out up to 65% of your gross income if you can’t work because you are sick, injured or become unemployed. Often people use this type of policy to protect monthly mortgage payments in case they are unable to work.

You can make multiple claims against the policy if you are unable to work on a number of occasions and it typically covers you for any illness or injury that prevents you from working.

Critical illness cover, on the other hand, is a one-off, lump-sum payment that is paid out if you suffer a critical illness or injury, as spelt out in your policy. After the payout, the policy is closed. The policy isn’t linked to your earnings and you can insure for however much you wish. Typical claims include cancer, strokes and heart attacks.  Typically people will insure themselves for a lump sum to cover the amount outstanding on a mortgage.

So you see the main differences are that critical illness is a one-off payment rather than a monthly payment, it can only be claimed once, it covers specific illnesses and injuries and can be insured for any amount, rather than the 65% of earnings with income protection. Critical illness can be taken out with life insurance and as a joint policy with a partner. Income protection is an individual plan.

As with so many of these things, the type of policy you take out depends so much on your personal circumstances and it is worth getting professional advice. Critical illness policies in particular can be confusing and vary enormously in what illnesses they do and don’t cover and even the severity of the condition.