If death is certain, can buying a life insurance plan be optional? If life is unpredictable, insurance can’t be optional. As an earning member (salaried /self-employed) of a family, having adequate life insurance cover is a must. That’s the basic building block of Financial Planning Pyramid.
We buy Life insurance cover to protect ourselves and our family members in case of any unfortunate event. Most of us think that simply buying a term life insurance policy will ensure the well-being of our family, specifically wife and children in case of any unforeseen events. Merely buying a life insurance cover alone will not necessarily ensure that your loved ones get the insurance claim amount in the event of your death.
Your term life insurance claim money may never reach your nominee or beneficiary. It can be taken by your relatives or people who you may owe money (also called creditors) in your absence. In today’s world, ‘buying on credit’ has become a common thing. Whether employed or self-employed, most of us buy on credit (home loan, personal loan, consumer loan etc.,).
In this kind of scenario, it is of utmost importance to make sure that only your dependents receive the claim proceeds of term insurance policy. You can do this by taking a term insurance under Married Women’s Property Act (MWP Act).
Married Women’s Property Act 1874 (MWP Act) & Life Insurance
MWP Act was created to protect the properties owned by women from relatives, creditors and even from their own husbands. The Act has been created to protect women’s rights, even after marriage. MWP act is applicable for all married women of all religions.
If you take an insurance policy under MWP Act, your life insurance policy is treated as a TRUST and you can be assured that the policy money will be given to your nominee(s) only. The claim proceeds are free from creditors, court and tax attachments.
Any married man can take a term life insurance policy under MWP Act. Infact, any type of plan (money-back / Term plan / Endowment etc.,) can be endorsed to be covered under MWP Act. This includes divorced persons and widowers. The policy can be taken only on one’s own name (the life assured has to be the proposer himself).
Even a married woman can buy MWP policy on her name with her children as beneficiaries, the husband will not get anything from the policy. It will be considered as a separate asset as if she is unmarried.
How to buy Term Life Insurance under MWP Act?
It’s simple and inexpensive to take a term life insurance policy under MWP Act. Below are the points to consider while buying your Term insurance policy under MWP Act;
- You can opt for a term plan under MWP act at the time of purchase only. So, kindly first check with your prospective life insurer about the available term plans that can be taken under this act. Look for those that explicitly mention compliance with the MWP Act 1874. Do note that some insurers provide a term plan under MWP Act for self-employed individuals only.
- Some of the life insurance companies provide an option to take term plan under MWP act through online mode as well. Whereas, some insurers request an Addendum (hardcopy) signed by the proposer.
- For example, ICICI Prudential Life offers an option to take a term plan under MWP Act through online mode. While you are buying the plan, in the online application form, you will see this question: I would like to buy this policy under Married Women’s Protection Act (1874) Just select “YES” for this question.
- Once selected, you will have to enter the beneficiary and trustee details e.g. the beneficiary name, relationship, date of birth and benefit share (in %). You can only choose your wife/child/children as beneficiaries. You can add multiple beneficiaries. Beneficiaries once declared under MWP Act cannot be changed, not even in case of divorce.
- If you are taking a term life insurance plan through offline mode, you can submit an addendum along with your proposal form.
- The nominees/beneficiaries under the Act can be:
- Only your wife
- Only your children (both natural, as well as. adopted)
- Your wife and children together
- When you are buying the policy under this Act, you can also add trustees. According to the MWP Act in insurance, the trustees can be multiple people, including any of your nominees or a financial institution/bank. It is not mandatory to include any trustee in the form, and you can change the trustees at any time.
- You can then pay the applicable premium for the desired / eligible insurance cover and submit your life insurance application form.
- Once the insurer accepts your proposal and issues the Policy bond, inform your spouse and beneficiaries about your term insurance policy details and the applicability of MWP Act. This is a very important step!
- You can cross-check if your policy is endorsed under MWP act or not, by requesting for a copy of your term insurance proposal form from the life insurance company.
Term Life Insurance Policy under MWP Act & FAQs
- I have already taken a Term Life Insurance policy, can I now assign it Under the MWP Act? – No, you cannot assign an existing term insurance policy under the MWP Act. If you want to assign any policy, it has to be done at the time of purchase only.
- Can I assign a term plan taken under MWP Act to my bank? – No, you cannot assign someone else or take a loan against the policy if your insurance plan is covered under the MWP Act.
- Can I surrender a Policy that is covered under the MWP Act? – Yes, you can surrender the policy, but it has to be signed by the beneficiaries. The proceeds of the policy will be given to the policyholder for the benefit of the beneficiaries.
- Can I change the beneficiary of the Policy, If I nominate my wife as the Beneficiary, but we end up divorcing each other? – No, you cannot change the beneficiary once you have opted for one already under the MWP Act.
- What if my Wife is the beneficiary of the Policy, but she passes away before Me? – In the event of your wife’s death, your legal heir will receive the proceedings of the policy. But it is recommended to nominate more than one beneficiary.
- Can I have more than one Term Plan Under The MWP Act? – Yes, you can have more than one term insurance policy under the MWP Act, but they have to be registered separately under the MWP Act.
- Can I nominate my parents or siblings as beneficiaries? – No, this act only covers your spouse and children.
- Is MWP Act applicable to all religions? – Purchasing a Life Insurance Policy with the Married Women’s Property Act is applicable to all religions.
Due to lack of awareness, very few policies are being taken under MWP Act. Life insurance is a tool to protect the dependent family members. If this purpose is to be achieved in its fullness, then having the term life insurance plan covered under MWP Act is the easiest and the best way. So, the next time when you are buying a life insurance policy, suggest you to assign it under MWP Act. But, do not misuse the MWP Act with an intention to defraud your creditors.
Have you taken your term insurance policy under MWP Act? Please share your views!
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ReLakhs.com is not biased towards any insurance company. Examples or references given in the above article are for the knowledge of readers only.
(Post first published on : 16-Jul-2023)