Unemployment insurance claim money paid direct to mortgage company

Hootie19

We have our current mortgage with GE Money, and are in the process of moving to a high street lender.

Last November I lost my job. It was a temporary contract with a local authority, which I had anticipated would become permanent, but when it ran out, I was told the job was no longer there.

I had the odd bit of temping work here and there, but not very much, and eventually in March, I sent off a claim form under our mortgage protection insurance.

I heard nothing, until yesterday (yes, five months later!) when I received a letter to say that they had approved a payment of around £1,600 (can't just remember the exact amount, and it's not really relevant). The period covered is up to March 2010, and I started my current, long term temp position at the beginning of May 2010.

I called the insurance company today and asked how and when I could expect to receive the money (we had not missed a mortgage payment during my unemployment) only to be told that they had paid the money direct to the mortgage provider.

So this means that the mortgage provider has been paid twice - they've had their regular mortgage payments AND they've now got the money which I assumed was to recompense us for my unemployment and maintaining our mortgage payments. Luckily, we didn't have to borrow from friends or family to maintain the payments, so we were not relying on the money to repay anyone. Luckily!

Is this the usual way of dealing with unemployment claims? As it turns out, as I said above, we are in the process of remortgaging with NatWest and the figure used for the remortgage is actually higher than the outstanding balance now (given that more mortgage payments have been made) and now this extra money will also be reducing the balance. Or will it? Our current mortgage doesn't allow overpayments to the account. Will this amount the insurance company has paid to them be taken as an overpayment, given that there are no arrears or missed payments on the account?

I would be very put out if we weren't changing mortgage providers and able to get the money back, so this is a bit of a rhetorical question I suppose - which is, is this the normal way these claims are paid? It might be something to look out for with any insurance policies we take out in future.

Sorry, I think I've gone on a bit - it's very long!

dunstonh

Is this the usual way of dealing with unemployment claims?

Some providers pay the lender, some pay direct to bank account. There are advantages with both methods.

For example, when its paid to the lender directly it does not impact on means tested benefits. If its paid to you directly it does.

Its part of the research you do when you buy a plan and decide which method you want.

Evilm

I would assume that the extra payments have been taken as overpayments on your behalf and reduced what you owe so whilst the cashflow would have been nice hopefully you have not lost out.

Phone the company that received the payments and asked them what they did with them and how they treated them. If they haven't used them as overpayments then ask them to refund them to you.