Critical illness insurance payout

nukebox

Hello,
Apologies upfront for what are probably naïve questions that follow. Following a turn for the worse in health, it looks like I'm due to be paid out by some critical illness insurance. I have 2 policies that are going to pay out:

• Joint (with partner) - mortgage protection policy (life and critical illness)
• Sole - life & critical insurance policy

My questions are:

• Are these payments taxable (either for me or my partner)?
• Do I/we have to declare these payments to HMRC?
• Are there any issues with the payments going into a joint account (again from a tax point of view)?

I just want to make sure that we're not going to be liable for anything before we use the money to clear off the mortgage.
I appreciate any help and advice you can offer. Thanks in advance.

Sandtree

Life will depend on how its written (in trust or not etc) and who the beneficiary are (considering how life changes, if you both die at the same time etc). Putting into trust generally avoids IHT and inheritance doesnt count as income in the UK

Critical illness is not counted as income so isnt taxed when its paid to you. 

Weighty1

The thing which is most likely to be affected is your ability to claim any means tested benefits.  As the cash in the bank from sole plan, which isn't needed to repay the mortgage, is likely to affect your eligibility.  You could potentially write both plans into trust and "gift" the critical illness cover into trust so that it would not form part of your estate, however, you may potentially be classed as deliberately depriving the system, since it sounds like a critical illness has already been diagnosed, so it may not work anyway.

TudeT80ude

Hi
i worked for a bank for 10 yrs and took out the critical illness insurance cover for both my husband and I. When I was made redundant I asked if I could keep the insurance and pay the higher premium as it was discounted. I was tol I couldn’t but then had to find other insurance which by this time we were older and the same cover was too expensive. Is it possible that I was mid-sold it?

dunstonh

TudeT80ude said:

Hi
i worked for a bank for 10 yrs and took out the critical illness insurance cover for both my husband and I. When I was made redundant I asked if I could keep the insurance and pay the higher premium as it was discounted. I was tol I couldn’t but then had to find other insurance which by this time we were older and the same cover was too expensive. Is it possible that I was mid-sold it?

You shouldnt post questions on unrelated issues to someone else's thread.  It is considered bad form as you can stop them getting the help they are looking for.   You should post on your own thread.   However, as yours has a simple answer, I will give it.

No you were not missold.  Missale means incorrectly sold at the point of sale.    The fact your CIC was arranged on discounted terms does not mean it had to be cancelled when you left the bank.   You were misinformed at that point and have grounds to complain if you have acted on that.