Section 6 of the Married Women's Property Act, 1974, states that when a married man purchases a term insurance plan under the MWP Act, only his wife and children will receive the death benefit.
In a regular term plan, the death benefit that is to be received by the nominee can be claimed by the creditors, or it can be attached for the repayment of loans that are in the name of the insured individual. Rather the creditors will have the first claim on the proceeds that come with the policy. As per the Married Women's Property Act of 1974, the claim amount will only go to the wife and children of the insured. No creditor of any unpaid loan, or any government agency, can make a claim on the proceeds after the death of the insured individual.
How can getting an insurance policy under the MWP Act help you?
When you buy a term insurance plan, as per the MWP Act, the policy is regarded as a trust over which the trustees have control. In case of the death of the insured, the death claim can be received only by the trustees. Creditors and relatives of the proposer can not make any claim. The trust would hold the claim proceeds (death benefit) for the wife and child/ children. Thus, if after your death, you have some financial liabilities, as explained above, the creditors would first want their share. However, when you give the protection of the MWP Act to your loved ones, you will be able to save them from any such situation.
Who can opt for life insurance under the MWP Act?
A male resident of India who is married can opt for insurance under the MWP Act. Even men who are widowers or divorcees can buy an insurance plan under the protection of the MWP Act, with their child/ children as beneficiaries/ beneficiaries. It should be kept in mind that to avail the benefit of the MWP Act, the policy has to be in the name of the married man.
If you fall in any of the following categories, you should most definitely think about buying insurance under the MWP Act:
- If you have a wife and child, you need to offer financial security for their future.
- If you have any loans and liabilities in your name.
- If you wish to safeguard your wife and children from creditors or your relatives with dishonest intentions.
How to get an insurance policy under the MWP Act?
The procedure to get an insurance plan under this act is very basic. You only need to fill in an addendum when you fill in your Policy Application Form at the time of policy purchase only. Most insurance providers will assist you in such formalities. It is important to note that the policy cannot be endorsed under the MWP Act after the policy has been issued. It needs to be taken at the time of the policy inception only.
Things to remember when you buy an insurance policy under the MWP Act?
Once you name your wife and child/ children, it would remain unchanged throughout the term of the policy. There is no option to change the beneficiaries. Even after buying the policy, if you get a divorce from your wife, still, she and the children would receive the death benefit in case of your death. As a beneficiary, you can choose the following:
- Only your wife
- Only your child/ children
As the policyholder, you have the option to divide the sum assured amongst the beneficiaries. Depending on your wish, they would receive a payout. You would not be able to apply for a loan against a life insurance policy that comes under the MWP Act. In case the policy comes with a maturity benefit, the payout would be paid to the beneficiaries.
When Rajeev purchased a life insurance policy of INR 50 lakhs, he was very content that he had secured the future of his wife Anuradha and twin girls. He was sure that even if something happened to him, his family would be able to sustain a decent lifestyle. However, when he passed away tragically in a motor accident, Anuradha could not get any benefits from the insurance policy. As Rajeev had some loans in his name, the lenders got most of the proceedings of the policy. There was hardly any amount left for Anuradha, and in her time of immense grief, she was left financially helpless. If only Rajeev had known about the MWP ACT and had included it when he purchased the policy.
Conclusion
As the primary earner in the household, your main aim in purchasing a life insurance policy is the financial security of your wife and children. But you need to bear in mind that only buying a suitable policy is not enough. You need to make sure that the proceeds of the policy can help your loved ones with the support they require in their time of need.
Also Read: Everything You Need To Know About Non-Linked and Non-Participating Term Insurance Plan