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Why & How of Buying Life Insurance Policy Under MWP Act ?
- DetailsWritten by PolicyBazaar -
- Hits : 7942 -
Modified 15 July 2016
Imagine this scenario: A 45 year-old housewife with two children has just discovered that her husband’s business is not doing very well. He has to take a large loan to keep it afloat. Fortunately, her husband’s insurance policy will mature soon and the proceeds will tide them over. Soon after, the business goes bankrupt and the family is left without a steady source of income. At this point the woman finds that their only hope, the insurancepolicy proceeds, is now the legal property of her husband’s creditors.
It is quite easy to save your family from such turmoilby using a legal safeguard that was put in place by the Indian government, called the Married Women’s Property Act. The MWP act in life insuranceensures the well-being and emotional peace of your dependents even if your personal finances are in crisis.
WHAT IS THE MARRIED WOMEN’S PROPERTY ACT?
The Married Women’s Property Act originally stated that the earnings of a married woman in India (barring citizens of Jammu and Kashmir) is to be considered as her separate property. An MWP act in life insuranceamendment was in added in 1923 which made it relevant to life insurance, according to which the proceeds from a husband’s insurance policy may not be “subject to the control of the husband, to his creditors, or form a part of his estate”.
What this basically means is that if a married man buys a policywith an MWP addendum, the proceeds from MWP act in life insurancewill be effective property of his beneficiaries and not be treated as if it were a part of his estate. Therefore, the proceeds from MWP act in life insurance cannot be used to repay his debt or other liabilities even after his death.
WHO CAN GET IT?
Any married man can take a life insurance policy under MWP Act, including divorced persons and widowers. All varieties of policies are covered under MWP irrespective of time, age and premium amount. Amarried woman can also buy MWP policy in her name with her children as beneficiaries. The husband will not get anything from the policy as it will be considered a separate asset.
A life insurance policy under MWP Act is a must for self-employed individuals, business owners, those who need to take substantial amounts of credit, and those who have volatilesources of income.
WHO ARE THE BENEFICIARIES AND TRUSTEES?
The beneficiary under MWP act in life insurancecould be:
- The wife alone
- The child/ children alone (both natural and adopted)
- Wife and children together
The policyholder can appoint one or more people (majors) as trustees. The trustee can also be an institution, like a bank, or a beneficiary as well. The consent of the trustee must be documented along with the MWP addendum. Unlike a beneficiary, having a trustee is not mandatory and can be changed any time.
HOW CAN YOU AVAIL IT?
Getting a policy assigned under MWP Act is easy and inexpensive. In order to take the policy under the act, the proposer must fill up an MWP addendum along with the life insurance proposal form, to avail MWP act in life insurance. The MWP addendum form is available with the insurance agent or can be downloaded from the insurance company's website.Details of the beneficiaries, of trustees (if any) and the share of benefits accrued to them needs to be provided. But beneficiaries once stated in the form cannot be changed later. Also, insurance policies once declared cannot be brought under the coverage of MWP act in life insurance.
Emphasises welfare of the family instead of procedural formalities
Policyholder loses all control over the policy, though he must keep paying premiums
Applicable for women across all religions
Beneficiaries cannot be changed at any time
Money the policyholder hasplanned for the future is used for that very purpose and not to pay off debts
No change can be made to the policy without written consent from the beneficiaries, and only if they are majors
No need to create a separate Trust for the children under the Trust Act
Loans cannot be taken on the basis of this policy
Works for the upliftment of women and gives them capital to find new forms of employment
Runs the risk of being misused for defrauding creditors, or other unscrupulous purposes
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