Most of the people think that buying life insurance will ensure the financial well-being of their family, in case of an unfortunate event. However, by only buying a life insurance policy will not ensure that your spouse and/ or children will get the insurance claim amount. The death claim amount under a life policy may not reach your nominee or beneficiary. If you have an accumulated debts, the creditors will have the first claim on your policy claim amount. In order to protect your family against such a scenario, you need to bring the policy under the scope of MWP Act, 1874. Once the policy is covered under MWP Act, only your wife and children are entitled to receive the sum assured in the event of your death.
The Married Women’s Property (MWP) Act is intended to protect the properties owned by women from relatives and creditors. Under this act, any property belonging to the women remains unattached even if the court attaches their husbands’ properties for repayment of the debts. The property is also protected in case of the untimely death of the husband and bank wants to recover the dues through selling his assets. While buying life insurance, it is important for the husband to get it under the MWP act that will protect the financial interests of his wife and children.
Section 6 under MWP Act specifies that a life insurance policy bought by a married man on his own life and nominated his wife and children, or any of them as beneficiary, shall be deemed to be a trustee and they are entitled to receive the benefits payable under the life insurance policy. It also mentions that if the trustee/s is not duly appointed to receive the payouts, the same will be paid to the official trustee of the state in which the office of the insurance company from which he bought the policy is situated.
Any married man (including, widowers and divorcees) can buy the life insurance policy in India under the MWP Act. The policy can be bought in a single name with the proposer being himself. Not only term plans, you can buy any life insurance policy under this act.
Here is the list of individuals who can buy the policy under MWP Act.
- Businessman and salaried individuals who have taken loans or other debts.
- Those who want to financially protect their wife & children from creditors/relatives who might have the intentions to cheat your family.
- It is best for everyone who is buying the life insurance, to protect their loved ones under MWP Act.
The married women can also buy insurance policy under MWP Act and nominate her children as the beneficiaries. In this scenario, children are entitled to receive the benefits payable in the policy.
The beneficiaries opted for a life policy under MWP ACT can be:
- Your wife
- Your children (natural or adopted)
- Wife and children together
The policyholder can make a trust in favor of a named wife and/or named children. He also has the option to make a trust in favor of the wife and children as a class. It ensures that the wife and children surviving are entitled to receive the insurance benefits. Mohammedan policyholders can only make the trustee for the named wife and/or children.
Each policy under MWP Act is considered as a separate trust. At the time of buying the policy, you are required to mention the trustees. The trustees can be the wife, his adult children or any third person. You have the flexibility to change the trustees during the term of the policy. In order to ensure financial security for your family, you need to make the wife and children as a ‘beneficial nominee’, and then only they will be able to receive the life insurance proceeds. You can also specify multiple beneficial nominees and their share in the amount payable. Once chosen, you can’t change the beneficiaries of the plan at any time.
In the event of a death claim, the benefits will be received by the trustee. It will not be considered as an estate of the policyholder and can’t be claimed by the debtors as well. Upon designating your wife/ children as the trustee, the financial well-being of the wife and/or children is absolutely protected. Once covered under MWP Act, the policyholder cannot make changes in the plan.
Getting policy under MWP Act is extremely helpful for those who have taken the debts. To recover their money, the creditors have the right to sell the assets of the owner and their family, such as land & buildings, jewels, savings in life insurance, bank deposits, etc. However, the creditors cannot take the claim amount received under the life insurance policy covered under MWP Act. Thus, this policy serves an immediate asset for the dependent family members.
Despite the benefits available under MWP Act, not many people are getting the life policy covered under this act. It’s due to negligible awareness about the act. When it comes to getting a life insurance policy under MWP Act, you need to fill MWP addendum which requires filling details of the beneficiaries, the percentage of the benefits that are to be paid to them and the trustees. You need to fill this form at the time of filling the proposal form.
You can add a life insurance policy under MWP Act at the time of its buying. Once opted, you need to mention the beneficiary and trustee details such as name, relationship, date of birth and benefit share. Getting life insurance under MWP Act is the best possible way to protect your family members and that’s available at no additional cost. So, when you plan to buy a life insurance plan, make sure to buy it under the MWP Act.