§ Mr. Keith Bradley
Payments from a mortgage payment protection insurance policy (MPPI) are treated as income for income-related benefit purposes. In Income Support and Jobseeker's Allowance (Income-Based) different rules apply depending on whether or not payment is made directly to the lender or the borrower. If payment is made direct to the lender, the full amount is ignored including capital repayments, endowments, PEPs, building insurance and mortgage payment protection premiums and any ineligible interest payments. The only exception to this is when Income Support Mortgage Interest (ISMI) commences and MPPI is already in payment, the MPPI income is offset against the amount of ISMI due. If paid direct to the borrower, the amount taken into account is the excess after housing costs and related insurance premiums have been deducted.
Income from other types of loan insurance is treated in the same way as most other types of income. It is disregarded if, under the terms of the policy, it is payable to a third party only (in this case, normally the creditor). If it is paid to the insured person it will be taken into account. It may also be taken into account if it is being paid to a third party but could be paid to the insured person.
This approach to the treatment of income in the income-related benefits has been unchanged for many years. Representatives of the insurance industry have recently approached the Department and are having discussions with officials about the application of the rules.