Introduction
Life can be very unpredictable. The COVID-19 pandemic has reminded us of the importance of financial planning and having a safety net for our family. These safety nets provide our family with financial security in the event of any unforeseen or unfortunate circumstances. A term life insurance is one such safeguard. It helps the insured's family to have financial surety in case of the death of the bread earner.
For as long as we can remember, women have had to be dependent on their husband, after marriage, to look after them and provide for the family. While that has started to change now, it is important to see to it that women get their rights no matter the circumstances. The MWP Act of 1847 is one such act that protects the rights of a woman.
What is the MWP Act of 1874?
Women weren't allowed to own property initially. Originally, this law was passed to protect women and her properties from her husband, other family members, and creditors.
Section 6 of the Married Women's Property Act (MWPA), 1874, provides 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 to his creditors, or form part of his estate.
In other words, this law states that the death benefits received by the beneficiary will be their property alone, and it won't belong to the husband or any of his assets. Only the wife and the children can be named as beneficiaries, and no creditor or family member can claim any part of the death benefit amount.
Who should get a term plan under the MWP Act?
Any man who is a citizen of India and has been married can get a term plan under the MWP act. A man who is a widower or has been divorced can also get a term plan under this act. He can name his children as beneficiaries in the policy. However, he should get the policy in his own name. Term plans under the MWP Act are especially useful for those living in a joint family, where there are many relatives who might want a part of the death benefit amount.
A woman who has been married can also get term insurance under MWP and name her children as nominees or beneficiaries. In this case, the husband will not get any death benefit.
How does MWP Protect the Life Assured's Wife in Case of an Untimely Death of the Assured?
To understand the role of MWP in protecting the wife of the assured in a term life insurance policy, we need to understand the difference between a beneficial nominee and a nominee.
A nominee is merely a person who receives the death benefits on behalf of the legal heir. A nominee may or may not be the beneficiary of the death benefit. The Insurance Amendment Act of 2015 introduced the term 'beneficial nominee', who is also the receiver and beneficiary of the death benefit.
If a person is a nominee, then the death benefits received by them can be reclaimed or challenged by the creditors, or relatives.
For example, let us imagine a scenario where a man applies for a term insurance policy of INR 1 crore, and names his wife and children the nominees. If he dies, the wife and children are supposed to get INR 1 crore. However, if the husband or the legal heirs had some pending loans with the insurer, the insurer may use a part of the INR 1 crore death benefit for the repayment of the loans. Even if the wife and children are named beneficial nominees, other family members can lay claim to the benefit proceeds. Thus, the family may not get the full amount.
To protect the nominees against such a situation, the husband can name his wife and children the beneficial nominee under the MWP Act. The MWP Act allows only the wife and the children to be named as beneficial nominees. In such cases, they will get the full death benefit, and no family member or creditor can challenge the money. Also, even if the couple divorces, the beneficiaries of the policy remain the same.
Thus, in a situation similar to the above given example, the wife and the kids will receive the whole amount, that is, INR 1 crore. No part of the amount will be claimed by the creditors or family members. Thus, the MWP helps to protect the financial interests of married women and their children under every circumstance.
How to get a Term Plan under the MWP Act?
To get a term plan under the MWP Act, the husband needs to file an MWP addendum while taking the term life insurance policy. The husband should buy the policy on his own name only. There is no need to establish a separate trust fund or a settlement deed. The MWP addendum can be filed only while applying for the policy, and not later.
Points to be taken care of while filing for the MWP addendum:
- The policy details cannot be changed later. This means that the names of the beneficiaries cannot be changed even by the husband.
- The husband has no right over the survival benefits if he survives the tenure. The survival benefit will also go to the wife and the children only.
- The husband’s parents also cannot lay claim to the death benefit amount.
- As long as any of the beneficiaries remain alive, nobody has the right to any part of the benefit amount.
Key Takeaways
The MWP Act was passed to empower women financially, and provide financial security to married women and their children in case of the death of the husband. It prevents anyone (creditors or relatives) from exploiting and taking advantage of the wife after the death of their husbands. If the husband fears that the finances of the wife would be at risk after his death due to unpaid loans or any other reason can opt for term life insurance under the MWP Act. Those living in joint families can also consider this option while getting an insurance policy.
