Critical illness payout

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Hi . i wondered if someone could help me please . I had a pay out in feb 2020 and i am very unlikely going to be able to return to work . When i have researched this its not classed as earnings or savings and what i intend to do is put towards my mortgage . However i am claiming universal credit and told them about this payout and they now want to know the ins and outs . Has anyone experience of this please ?
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From a brief Google it looks like you're correct that the payout would be exempt from the means test if you used it to pay off debts, including a mortgage
https://corporate-adviser.com/insurance-payouts-excluded-from-universal-credit-means-test-dwp/
However (a) I can't say for certain whether this is still current and (b) the DWP might still want to know the ins and outs - for instance you might have to provide evidence that you did indeed use it to pay off the mortgage rather than spending it on something else (or keeping it stuffed it under the mattress).
https://www.cii.co.uk/news-index/articles/impact-of-insurance-payments-on-universal-credit/68004
The OP still needs to be robust with the DWP in maintaining that their aim in paying their mortgage off for some reason other than to increase or maintain their UC payments.
I would recommend you to first create a checklist of your necessities, expenses and debts and accordingly take call on how you would like to roll the money.
I'm in a similar situation albeit I don't have a mortgage to pay off. As it stands, I'll be receiving pay out for my critical illness and losing my UC entitlement entirely as I pay rent...
However, any additional life assurance/CIC/PHI, such as used for income replacement or family protection, would be included in any means test. However, many people would be looking to support themselves and not be subject to means tests if they can help it.
I'm in a similar situation albeit I don't have a mortgage to pay off. As it stands, I'll be receiving pay out for my critical illness and losing my UC entitlement entirely as I pay rent...