Three areas to consider here.
- Who the payments should be made payable to.
- The impact on entitlement to state benefits.
- When payments are to be made.
Who is paid
Mortgage protection insurance clams are usually paid direct to the lender for credit to the customers account. This allows loan repayments to be kept up to date and is more convenient for the customer.
If however the mortgage protection policy is a stand alone and not distributed by the lender, payments may well be paid direct to the customer.
State benefits
If the customer is entitled to receiving earnings related state benefit then the income protection payments may be considered as part of the income. This is not the case if the payment is made directly to the lender. Also if the customer can show that the payment they receive is passed immediately to the lender, then that may also help these payments not to be treated as income.
When
Timing of payments depends on the type of waiting period that applies to the policy.
Mortgage protection insurance payments are usually paid in arrears. The question then to ask, is when does the customer start to earn the right to receive benefit under the policy.
Under a Franchise waiting period benefits are usually earned for whole months of illness or unemployment, so any odd days at the end of the claim are not paid.
Under an Excess benefits are usually earned on a daily basis and so each odd day at the end can be paid.
An exception is that some polices have a 14 day Franchise but earn and pay a full month at the end of the 14 days. The second payment would then be made after 45 days and then every month thereafter.
Note. It is possible to have an excess with a monthly benefit and a Franchise with a daily benefit.