No one wants to think about becoming seriously injured or being diagnosed with a life-threatening chronic illness, but the fact is, you really never know if and when one or both of these tragedies might strike. That’s why it’s extremely important to consider purchasing some sort of protection from the financial burdens of illness and injury. After all, we don’t think twice about insuring our cars, houses and other valuable belongings, but far too few of us ever consider insuring what might be our most valuable asset of all: our ability to earn an income. So what are your options when it comes to getting covered?

The most common forms of coverage are disability insurance and critical illness insurance, and although they might sound similar, they were actually designed to serve very different purposes. So to clear up some of the confusion, here’s a quick breakdown of both types of coverage:

Critical Illness Insurance

This type of coverage is an insurance product designed to pay a tax-free lump sum should the policy holder be diagnosed with a life-altering, or terminal illness. The specific conditions covered by critical illness insurance tend to vary depending on the insurance provider, but almost always include heart attack, cancer and stroke, and they may also cover you in the event of a major procedure such as an organ transplant or coronary by-pass surgery. Other illnesses covered may include, Parkinson’s disease, HIV/AIDS, and Alzheimer’s disease.

Disability Insurance

Disability insurance can and will cover you in the event of most of the illnesses mentioned above. The difference is how you receive your benefits. Unlike critical illness coverage, which pays one lump sum, disability insurance is designed to act as an income replacement. With a traditional disability policy, a certain amount of your usual paycheck (usually around 60 percent) is paid out to you each month while you’re unable to work and/or undergoing treatment.

So does it matter which one you choose?

Actually, since both serve different functions, you don’t have to choose, and it can be extremely helpful to have both. Here are two key differences that make both types of coverage beneficial:

  • Payout – Disability insurance pays in monthly installments to replace income so you’re not struggling to feed yourself/make ends meet while you try to recover. However, these smaller monthly payments can make it difficult to produce the considerable up-front costs related to major medical treatments and procedures. That’s where critical illness coverage steps in. The lump sum you receive from your critical illness payout can be used to cover your treatment and/or surgery so that you don’t have to deplete your savings in the process of getting well.
  • Proof of Income Loss – With critical illness insurance, you are not required to prove any further loss of income after your diagnosis and a small waiting period. Since disability insurance is essentially income replacement, once you are able to return to work and start earning again, your benefits will stop or decrease depending on your particular policy and circumstances.

So while both types of coverage seem similar at first, they both are designed to protect you in different ways, and can be used to complement each other and provide a much more robust safety net for you and your family in the event of tragedy. Talk to your insurance provider today and get the protection you and your loved ones deserve.