A marked improvement on the arrangements for the outgoing working-age legacy benefits has been clarified by the Department for Work and Pensions (DWP).
The Building Resilient Households Group (BRHG) sought clarification from the DWP on how payouts from term life, critical illness and terminal illness insurance will be treated for means-tested benefits for working-age people.
The key change is that Universal Credit legislation makes it clear that if a person uses their capital to pay off or reduce a debt, including a mortgage, they will not be treated as depriving themselves of that capital.
This is a marked improvement on the arrangements for the outgoing working-age legacy benefits. It shows that the new benefits system being rolled out will allow people to use insurance payouts to reduce or pay off their mortgage or any other debts.
Dr Matthew Connell, director of policy and public affairs at the CII, said: "The CII welcomes this useful clarification about Universal Credit. It is helpful for consumers to know that, under Universal Credit, they and their families will not be worse off if they take steps to protect themselves with term life, critical illness and terminal illness insurance by paying off mortgage debts, should they need to claim this state benefit.
"The CII supports the work the [BRHG] is doing to build trust in insurance, so that consumers can be confident that protection insurance will put them in a better position should the worst happen."