Combining life insurance, critical illness cover and income protection

• •Life insurance: generally pays a lump sum if you die during the policy term, subject to the policy. It protects the people who would be left with the mortgage, bills or children. See our life insurance page.
• •Critical illness cover: pays a lump sum when you are diagnosed with a condition that meets the policy's definition. It can help with recovery costs or reduce debt, whether or not you return to work.
• •Income protection: replaces part of your earnings while you cannot work because of illness or injury, after a waiting period. It does not ordinarily cover redundancy or replace all of your lost earnings.

Because the claim triggers are different, one policy can pay when another would not. Someone off work for a long time with a condition that does not meet a critical illness definition could claim on income protection but not on critical illness cover, for example.

A common approach is to give each policy a distinct job. Life cover repays the mortgage and supports the family if you die. Income protection keeps the monthly bills paid if you cannot work. Critical illness cover provides a lump sum for costs a monthly income may not stretch to, or to reduce debt after a serious diagnosis.

Combined or separate life and critical illness cover

Life and critical illness cover are often arranged as one policy that pays on life or earlier critical illness. It pays once, on whichever happens first, and then ends. That usually costs less than separate policies, but leaves no life cover after a critical illness claim. Separate policies can each pay out, at a higher cost.

Multi-cover plans

Some insurers offer plans that bundle several benefits into one arrangement, with each benefit set up for its own amount and term. They can be convenient, but the features and flexibility vary by insurer, so they are worth comparing with separate policies.

Start by asking which event would cause your household the most difficulty. For a family relying on one main income, losing that income through death or long-term illness may be the biggest risk. For someone living alone with no dependants, being unable to work may matter more than life cover.

Things to consider include:

• •Who depends on your income, and for how long
• •Your mortgage or rent, and other debts
• •Sick pay and employee benefits, and how long they would last
• •Savings you could draw on
• •Your age, health, smoking status and occupation, which affect the cost of each type of cover

Adjusting the amount, term or waiting period on each policy can bring a combination within budget without dropping a type of cover altogether.

Overlap happens when two arrangements target the same need. Examples include income protection and critical illness cover both set up to meet the same mortgage payments, or personal cover that duplicates death-in-service or group income protection from your employer.

Some overlap can be deliberate, for example to give extra security for a mortgage. Our guide to reviewing your existing protection explains how to check what you already have.

List your household's main commitments, any existing policies and your employee benefits. From there we can show you which risks are covered, where the gaps are, and how life insurance, critical illness cover and income protection could fit together within your budget.