Q&A - Insurance company cannot tell me if injury pay-out will affect my benefits

Q: I suffered quite severe personal injuries in an accident. My insurance company has helped me through the process of making a compensation claim and I have now had an offer of £20,000 which I am about to accept. The insurance company doesn’t however seem to know whether or not this will affect my state benefits. Please can you confirm the situation? 

A: It is not clear whether it is your insurance company or your opponent’s insurance company that is settling the claim with you, but that is another matter. Either way, the lack of factual information is why you need to instruct your own Solicitor to deal with your personal injury claim. 

If you receive damages for personal injury then you ordinarily have 12 months within which to spend those damages without them counting as capital for the purposes of assessing your eligibility for means tested benefits. The 12 month period starts from the date you receive any interim payment. If the money was kept in a Solicitor’s account it would start from the date it was received by the Solicitors. 

The idea of compensating you for your personal injuries is to make sure that you are put in the position you would have been if you did not have the injuries. You are not meant to lose out on the income you have from benefits. 

If the money is purely to settle a personal injury claim then it is possible to set up a Trust in which the money can be held and used for specific purposes, but not as a source of income. It may be that adaptations are needed to your house in the future which can be taken from the fund. An experienced personal injury lawyer would be able to advise you on this and, with the assistance of an independent financial advisor, set up a Trust with appropriate investments.