Does a person have to declare the amount paid to them in personal injuries?

[raleah]

A relative had their car written off 4 years ago by a driver who ran into her from behind. She had taken out legal protection on her car insurance at the time. The third party paid out for the car value, and then she was eventually paid out a figure for personal injury when the lawyers dealt with it who took the case on from her legal protection cover.
Since then she has always declared the no fault accident and the value of the car that was paid out to her when making a new insurance quote and nobody has asked her how much she got paid in injuries. Now after 4 years, an insurance company has asked her what she received in injuries. Is this correct? She was always led to believe that her personal injuries pay out was because she had taken out 'legal protection' and it was a no fault accident. Do they legally have a right to know this? Without the legal protection fee she paid she would not have had the injuries paid out to her or a solicitor dealing with the case and that is the whole point of paying extra for the optional legal protection cover. I haven't a clue - does anybody know for sure?

[han]

My daughter and I were injured when a another driver hit the car I was driving. The driver's insurance company admitted liability and paid for the repairs and we were both awarded compensation for our injuries.

My no claims bonus was unaffected but I did have to declare how much compensation we were both awarded and how much was covered by the other parties insurance - in our case 100%.
The insurance companies will actual check to make sure your relative tells the truth.