Being the man of the house, you would want the best for your wife and children. Be it providing them your love, care and respect or fulfilling all their financial needs.
You buy your life insurance policies to provide for your wife and children in case something happens to you and you are no more to provide for them. But if you have an outstanding loan or have borrowed money from someone, your life insurance policies are entitled to be attached to the loan. In case you pass away before repaying the loan fully, your life insurance policy proceeds can be used to pay the bank or your creditor.
But you can secure your wife and children’s financial future if the worst happens to you. The Married Women’s Property Act (MWP Act) is here to enable you to do that.
The MWP Act was incorporated to protect the rights of a married woman and her children. The idea behind this act is that the benefits of a life insurance policy are for the family and no one else can take it, in any case.
Section 6 of the MWP Act allows a married man who takes a life insurance policy on his own life to ensure that the policy is deemed to be a trust for the benefit of his wife or children. The beneficiaries of this trust can only be his wife or children and in no case the benefits from this policy can be paid to anyone other than the beneficiaries.
When you buy a policy under the MWP Act, you actually create a trust. You need to provide the details of the trustees who can be your wife and/ or children. You can also make multiple trustees at that time. And this trust can only be operated by the trustees in future. So no one other than your wife and children (the trustees) can get the benefits from this trust.
Once you create this trust, even you cannot undo it or change the beneficiaries in future.
Term insurance policies usually have very high sum assured. Upon death of the insured person, the proceeds from this can be used by the bank or other creditor to settle the outstanding loan. But you bought the policy with the intention of protecting your family if in case such a thing happens to you.
To make sure that happens, buy your life insurance policy under the MWP Act. The benefits will always be paid to your wife and children, even if you have other liabilities to pay off when you liquidate the policy. If you have a loan outstanding such as home loan, your bank cannot attach your policy in case you are unbale to pay the loan. If you have borrowed money from someone, he cannot make a claim on the proceeds from this policy.
People want to protect the rights of their wife and children but many are not aware of this act. Now that you are reading this article, you would want to go and make provision for The MWP Act in your existing life insurance policies. But you cannot do that. You can only opt for a policy to be under the MWP Act at the time you buy a new policy.
Who should opt? Married businessmen or servicemen who are Indian residents with outstanding loans, such as a home loan. Married men who have borrowed money from family/ relatives or other creditors. Married businessmen whose businesses have incurred debt. Widower or divorcee men can also take a policy under the MWP Act and name their children as beneficiaries. The idea behind a life insurance itself is to protect the future of the family, so any married man buying a life insurance policy should buy it under this act.
If you want to buy a new life insurance policy under the MWP Act, you have to fill an MWP addendum along with the policy application form. If you are buying your policy online, you will have an option to select if you wish to buy the policy under the MWP Act. You have to select this option or tick on “yes”. Once you do this, your policy, when issued, will automatically be under the MWP Act.