Critical illness payout & Benefits

[willibobs71]

Hello new member so please be gentle. This is a long post and I may repeat myself so apologies.
For over the past six years we have had a monthly payment going into our account to cover our mortgage from the mortgage insurance (it is actually a critical Illness cover) we took out with it. This was because I was diagnosed with ME/Fibromyalgia.
The amount the insurance pays in doesn't pay the full amount but it does help towards the monthly mortage payment.
This morning we recieved a letter to say that the inusrance company would like to pay us a large one off lump sum which would then mean they would then stop paying any more monthly payments.
Our mortage is about £70K and they are offerinng just over half that amount.
If we took the lump sum we would then pay part of the mortage meaning our payments would drop considerably lower per month.

The problem we have (yes there is some) is that I claim ESA and DLA. I know DLA is not means tested but with ESA or JSA would this lump sum be classed as an income even if it went straight from our account to pay the mortgage off? Also would WTC and Child tax credit be penalised because of this?
I know that if we decided not to take the lump sum they would still pay the monthy figure but the lump sum does seem the better option.

Having spoken to a few people they have said that the benefits people could turn around to us and say that do we have proof we were going to use it for the mortgage (we would and I am sure we could get a letter from our mortgage provider to prove this).
Another person said that we should not accept the offer show prove it wouldn't help us out and try to see about increasing it, although I'd rather wait until we wouldn't be penalised before going down that route.
It was also pointed out that technically it isn't an income as such because we took the insurance on the mortgage for a situation like
Thank you for any advice.
The company we have the policy with have said that if I took the offer and IF I ended up having to go back to work (I've been refused ESA but that's a different story) I wouldn't have to pay anything back but the policy wouldn't payout for my current illness which is fair enough.
They have also said they can't see a problem with them paying the money direct to the mortgage company meaning it wouldn't go into our bank account.

[Carneucopia]

A payment direct to your mortgage company - and which is an insurance cover really - wouldn't count as capital. You would have proof of that so I can't see a problem.
Further - you will still be left with some mortgage payments. If you receive qualifying benefits now - or at any time if things change - you may be able to claim SMI (Support for Mortgage Interest Payments) from the DWP.
Without knowing your actual amount of mortgage payment liabilty it does sound like a good deal. If you are able to get back to work in the future it should enable you to be more flexible regarding income expectations, and maybe ease yourself back to work with part time hours?

[willibobs71]

Thank you for your reply. If they can pay mortgage direct that would be great. It's more of a concern that if we decide
To take the offer and they can only put it into our bank account would benefits people see it as extra income even if we did use all of it
to pay some of the mortgage off? Would they class it as savings? We've talked to different people and they've said that savings are counted as just that money in the account that as built up over time and as been in an account for a minimum amount of time.
Our main concern is having that money in our account even for a few days.

[davewhit]

The reason they want to offer a lump sum is to cut the amount they pay out 70k looks nice now but depending on your age and long term outlook it might not be a good deal I dont think many people die from ME and have never heard of anyone dieing of fibro

I would seek advice from an actuary......... not an advisor on investments could cost about £150 but he could tell you all you need to know on how good a deal it is and if its not how much to ask for and in cases like this you can ask for more and people do

they could of course re test you in a couple of years and argue your better to get out of paying so taking the money now stops that happening

they would pay it off direct and your contract will have that in the small print too i think

[Carneucopia]

Thank you for your reply. If they can pay mortgage direct that would be great. It's more of a concern that if we decide
To take the offer and they can only put it into our bank account would benefits people see it as extra income even if we did use all of it
to pay some of the mortgage off? Would they class it as savings? We've talked to different people and they've said that savings are counted as just that money in the account that as built up over time and as been in an account for a minimum amount of time.
Our main concern is having that money in our account even for a few days.

The key here is that you would be able to prove that the money was meant for a specific purpose - ie to make a payment against your mortgage. That should be enough proof. I doubt there would be any problem getting the money paid straght to your mortgage account, but you could clarify that first with your insurers, and then take legal advice if you still have any doubts. It would also be advisable to check with your mortgage provider how such a payment would be treated. Would it in fact keep the term of the mortgage the same - and reduce the monthly payments - or would it reduce the term of the mortgage. You might find that you have different options.

[willibobs71]

Hi
Many thanks for the replies.
The Inusrance company have said they cannot see it being a problem having the money paid direct to the mortgage company although we are going to ask for this in writing.
They've also said that if I decide or have to go back to work there would be no penalty for taking the offer although of course they would not payout again if I became ill with the same illness.
Personally that would be great it would mean I wouldn't be worried about having to earn an extra £200 a month for the mortgage and it would mean I could atleast start part time work and build up from there.

I'm just concerned that if the money went into our current account how soon would I have to transfer it the mortgage provider before the DWP could claim it was savings? Can a sum of money that is intended for paying towards a mortgage be classed as savings by the DWP?

[davewhit]

its not savings and its not uncommon for people on benefits to pay off money from insurance companies every week peoples endowments are maturing not enough in most cases to clear things but reducing the total bill this is a once in a life time event for you but often happens at the dwp

[willibobs71]

its not savings and its not uncommon for people on benefits to pay off money from insurance companies every week peoples endowments are maturing not enough in most cases to clear things but reducing the total bill this is a once in a life time event for you but often happens at the dwp

Thank you for your reply. Whilst I was out yesterday I called in at a CAB from what he said DLA isn't means tested (which I knew) but also WTC, CTC, CB and CA which my wife gets for our autistic daughter are not classed as means tested in this situation. He showed me on the computer what the scenario would be if this money went into my account and it made no difference to benefits. He says the fore mentioned are income related so if we earned over the set amount then of course our benefits would be affected. Regarding ESA he said that mine would be Contribution based because I'd been working prior to becoming ill and my wife was now working. I do need to check that out to confirm I am contribution based. He even checked regarding council tax benefit and from what they said it would affect that because if we did pay off a debt and had proof then it would just be classed as lowering a debt.

So if I am right the benefits that are not DLA are just classed as income related and not what you have in your account?

[davewhit]

Thank you for your reply. Whilst I was out yesterday I called in at a CAB from what he said DLA isn't means tested (which I knew) but also WTC, CTC, CB and CA which my wife gets for our autistic daughter are not classed as means tested in this situation. He showed me on the computer what the scenario would be if this money went into my account and it made no difference to benefits. He says the fore mentioned are income related so if we earned over the set amount then of course our benefits would be affected. Regarding ESA he said that mine would be Contribution based because I'd been working prior to becoming ill and my wife was now working. I do need to check that out to confirm I am contribution based. He even checked regarding council tax benefit and from what they said it would affect that because if we did pay off a debt and had proof then it would just be classed as lowering a debt.

So if I am right the benefits that are not DLA are just classed as income related and not what you have in your account?

you need expert advice as the only way you can be 100% sure whats what is when an expert sights the documents.


many people on esa CB are finding its cb based as they get letters finding out it ends in april

[Duncan]

Thank you for your reply. Whilst I was out yesterday I called in at a CAB from what he said DLA isn't means tested (which I knew) but also WTC, CTC, CB and CA which my wife gets for our autistic daughter are not classed as means tested in this situation. He showed me on the computer what the scenario would be if this money went into my account and it made no difference to benefits. He says the fore mentioned are income related so if we earned over the set amount then of course our benefits would be affected. Regarding ESA he said that mine would be Contribution based because I'd been working prior to becoming ill and my wife was now working. I do need to check that out to confirm I am contribution based. He even checked regarding council tax benefit and from what they said it would affect that because if we did pay off a debt and had proof then it would just be classed as lowering a debt.

So if I am right the benefits that are not DLA are just classed as income related and not what you have in your account?

What the CAB said should be correct.

You said you get paid contribution based ESA which is not means tested but be aware it is only paid for one year. When ESA stops after one year, I would suggest you take over the Carers Allowance claim from your partner and then she could increase her hours of work of needed and you would still get the carers allowance.

I would say you are best to keep the monthly insurance payments unless you are confident you can pay the mortgage on the £35k left if you take the lump sum offered by the insurance company.