Critical illness payout 14 September 2021 at 4:07PM in Insurance & life assurance 11 replies 349 views

kelly56

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 ?

tacpot12

Why do you want to put this money towards your mortgage? 

kayleighali

tacpot12 said:

Why do you want to put this money towards your mortgage? 

Would this not be the most sensible thing to do? Ensure you have a roof over your head? Not having a go or anything, just it's the first thing I would think of doing but wondered if that was a bizarre idea!

Aretnap

You might try the benefits board - I suspect you'd get more and better answers there. 

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). 

edwel1793

When you say ins and outs, do you mean they want a detailed history of your pay out? I don't think that is necessary but you might just need to consider seeking legal advice for this. Shouldn't be a problem honestly.

tacpot12

kayleighali said:

tacpot12 said:

Why do you want to put this money towards your mortgage? 

Would this not be the most sensible thing to do? Ensure you have a roof over your head? Not having a go or anything, just it's the first thing I would think of doing but wondered if that was a bizarre idea!

It might be a very sensible thing to do, but the OP is at risk of the DWP deciding that he has paid his mortgage off just so that they can keep claiming Universal Credit. If the OP is paying his mortgage off because it will reduce his mortgage payments, or pay off the mortgage entirely so that he doesn't have to make mortgage payments, then that is a reasonable use of the money, but I wanted to understand what reason the OP would give the DWP.

dunstonh

The Department of Work and Pension do not include payouts from protection policies – including  critical illness cover - as long as the payout is used to clear debt.

https://www.cii.co.uk/news-index/articles/impact-of-insurance-payments-on-universal-credit/68004

tacpot12

dunstonh said:

The Department of Work and Pension do not include payouts from protection policies – including  critical illness cover - as long as the payout is used to clear debt.

https://www.cii.co.uk/news-index/articles/impact-of-insurance-payments-on-universal-credit/68004

That link is really useful as it clarifies that mortgage debt is treated as debt by the DWP, at least as far as a critical illness payment is concerned.

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.  

Akarsh_K3251

This sounds like a big step you are taking!

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.  

AltoSereno

dunstonh said:

The Department of Work and Pension do not include payouts from protection policies – including  critical illness cover - as long as the payout is used to clear debt.

In a situation where all else being equal, someone with a mortgage gets a much better deal than someone renting? Am I missing something?

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...

dunstonh

In a situation where all else being equal, someone with a mortgage gets a much better deal than someone renting? Am I missing something?

You are missing the fact that the person without a mortgage hasn't had the financial need to pay extra for life assurance/CIC and that there is no requirement to buy life assurance/CIC.   As someone has chosen to use their money to protect themselves that is considered a good thing and reduces pressure on Government spending.   

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...

It is better to have the payout and lose the UC rather than have no payout and continued UC.   When you chose the sum assured, you would hopefully selected an amount that can make a difference.