When buying a term insurance policy, the main aim is to secure the future of your family members in your absence. If you are married and you want to protect the future of your wife or kid or both, you can purchase a term insurance policy under the Married Women's Property Act (MWPA), 1874.
But what is the Married Women's Property (MWP) Act of 1874? How can it empower women when it comes to purchasing insurance policies? If you are a married woman in India, you must know about it. ET Wealth Online explains it.
To ensure the financial security of the family members, the proposer — or the person who buys the insurance in his or her name — usually nominates family members. However, a mere nomination does not ensure that the benefit of the insurance will always be paid to the nominated family member after the proposer's death. The nomination can fail to do its job in some cases.
According to the Insurance Laws (Amendment) Act, 2015, you can select a beneficial nominee that includes your immediate family members. When you make any of your immediate family members — spouse, parents or children — the nominee, he or she is entitled to receive the death benefit from your term insurance policy, and other legal heirs cannot claim the money. However, you also need to keep in mind that the proposer can change the name of the beneficial nominee during the tenure of the policy. So, if the husband changes the beneficiaries of the policy at a later stage, the wife and children may not get the sum assured in his absence.
Also, if the proposer has outstanding loans to any creditors or relatives or friends, the creditors would have the first claim to the insurance money before the beneficial nominees (spouse and children) can claim it.
Here the Married Women's Property (MWP) Act comes to the rescue of the nominees. Section 6 of the Married Women's Property Act (MWPA), 1874, says that “a policy of insurance effected by any married man on his own life and expressed on the face of it to be for the benefit of his wife, or of his wife and children, or any of them, shall ensure and be deemed to be a trust for the benefit of his wife, or of his wife and children, or any of them according to the interests so expressed, and shall not, so long as any object of the trust remains, be subject to the control of the husband, or his creditors, or form part of his estate”.
This means that any insurance policy bought by the husband on his own life and protected under the Married Women's Property Act will go in favour of his wife or children. The parents of the husband will not have any right over the sum assured. The husband himself will not have any rights to the survival benefits of the policy if there is any.
"The insurance policy purchased under the Married Women's Property Act is deemed to be a trust which ensures that only the wife and children receive the claim money. This also means that there is no need to create a separate trust to secure the future of wife/children after the demise of the husband," says Shailesh Poria, Partner, Economic Laws Practice.
A married man can buy a policy under the MWP Act for his wife and children. A divorcee or a widower can also buy a policy under the act for the benefit of his children.
Asset protection: "One of the primary benefits of the MWP Act is that it helps individuals safeguard their assets from potential legal threats and creditors. By allocating insurance benefits exclusively to named beneficiaries, the MWP Act ensures that the payout is protected from external claims, guaranteeing the financial security of the insured individual and their family members," says Vighnesh Shahane, MD & CEO of Ageas Federal Life Insurance.
This ensures that the financial security provided by the insurance policy remains intact for the family, especially during challenging times in the absence of the husband.
Safe from any family disputes: "The policy taken under the MWP Act gives a clear title to the beneficiary, i.e., wife and children, and it assists in demarcating the rights emanating from such policy in the event of any family disputes over inheritance or estate of the deceased husband," says Poria.
The insurance bought under the MWP Act operates as a separate trust, says Ankur Mahindro, Managing Partner, Kred Jure. “A policy under the act cannot be incorporated into the policyholder’s will and/or cannot be claimed by anyone other than the beneficiary — not even any other legal heir of the policyholder (including members of joint family and HUF).”
Financial independence for women: "The MWP Act empowers married women by allowing them to have control over the insurance benefits," says Shashank Agarwal, Advocate, Supreme Court of India. "This helps in promoting financial independence for women, as they can directly receive the policy proceeds and manage them without being dependent on their husband or anyone else.”
Estate planning: "The MWP Act also enables women to actively participate in estate planning. It enables them to secure assets for their future and that of their children, contributing to long-term financial planning and stability within the family," says Santosh Agarwal, Chief Business Officer - Life Insurance, Policybazaar.com.
During divorce: "It applies to all married women in India, no matter their background. Second, it gives financial security to women in the unforeseen circumstances of husband’s death, or the couple’s divorce," says Krishan Mishra, CEO, FPSB India.
a) Married men who have businesses or are salaried professionals with loans can purchase insurance under the MWP Act 1874 to protect their wives and children in case of an unfortunate event.
b) "Moreover, in the case of a joint family, a policy with MWP insurance protection safeguards the wife and children from potential disputes, ensuring their financial security," says Agarwal.
Poria says the MWP Act is applicable to married women irrespective of their religion.
To buy a policy under the MWP Act, you have to fill in the MWP Act addendum along with the insurance application. Some insurers also offer the MWP Act option with their online life insurance application, and you just need to select the "Yes" option while purchasing the scheme.
"A life insurance must be registered under the MWP Act when first bought. It cannot be endorsed later. Any life insurance, including investment oriented insurances, can be registered under the Act," says
Kapil Mehta, Co-founder, SecureNow.
"The Married Women's Property Act of 1874 is a prudent choice for anyone seeking to safeguard their family's financial future through insurance. It's particularly beneficial for married individuals concerned about their spouse and children's well-being in unforeseen circumstances," says Mishra.
