Car Insurance Pay Out

7501x

Hi,

If your car is written off and you receive a payout to cover the cost of your car, do UC then count this as income and/or capital? Or would you be allowed to pay that money out to replace your vehicle like for like?

poppy123456

It is classed as savings. If this takes your total savings to more than £6,000 then there’s a deduction of £4.35 for every £250 or part there of over that amount. More than £16,000 and you UC ends. 

Yes, you will be able to replace it like for like. 

7501x

Hi Poppy, thanks for your reply. I’m a little confused as if I’m able to replace it like for like, how can it then be classed as savings?

for example if my car was worth £18,000 so the insurance paid out £18,000. If the like for like car was £18,000, surely UC can’t stop my claim because I’ve had an £18,000 payout, as that money is solely to replace my car, it’s not actually savings?

hope this makes sense!

poppy123456

Entitlement to UC is based on circumstances on the last day of your assessment period. Lump sums are classed as savings, regardless of where they came from. If the money takes you over the maximum amount allowed then you will need to explain where it came from and what it was for.

calcotti

There is a 6 month disregard which applies for personal possessions. I can't find a definition to confirm whether or not a car is included as a personal possession but I think it would be. If the disregard it applies you would still need to tell UC if your capital goes over £6,000 and they would need to decide whether or not the disregard applies. If the disregard is applicable it means that you would have six months from receipt of the money to sort out buying the new car.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1085956/admh2.pdf

H2121 An amount received from an insurance policy within the past 6 months can be disregarded where it is in connection with the loss or damage to the

1. premises occupied by the person as their home or 

2. personal possessions of that person.

H2122 The DM may decide it is reasonable to disregard the money for a longer period if for example 

1. the repairs will take more than 6 months
2. the replacement of personal possessions will take more than 6 months.

poppy123456

Thanks calcotti, i never knew that but it does make sense. It's true what they say, you learn something new everyday.

7501x

Thanks ever so much!

calcotti

poppy123456 said:

Thanks calcotti, i never knew that but it does make sense. It's true what they say, you learn something new everyday.

To be honest I didn’t know and started a reply saying something else and then decided to double check!

7501x

Hi Calcotti, 

thanks again for your help the other day. I wondered if you knew the answer to this question also please?

If you receive a payout that’s classed as capital (not insurance), and you pay off things that are capital disregards such a debts, would the following be deemed as acceptable do you think? Two car finances paid off, then both cars (at that point owned) traded for one car that equals the same price. This obviously means the monthly outgoings of running two cars are reduced to one. I’ve tried to find the answer in the DM guidance but I can’t seem to find anything closer than an example whereby someone can’t justify buying a second car as a single person. My personal opinion is that surely UC cannot penalise you for exchanging two cars for one, as no additional money is being spent? I.e surely they cannot make you sell your assets and buy cheaper to then live on the money until your capital reaches below £6,000 again?

hope this makes sense!

calcotti

7501x said:

If you receive a payout that’s classed as capital (not insurance), and you pay off things that are capital disregards such a debts, would the following be deemed as acceptable do you think?

It depends on what benefits are being claimed.

For Universal Credit paying off debt is specifically permitted in the regulations and cannot be treated as deprivation of capital.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1073425/admh1.pdf
paragraph H1833

For legacy benefits paying off debts may be treated as deprivation of capital unless the debts are immediately due. In each case a Decision Maker has to decide whether or not it was reasonable.