Insurance Basics

Married Women's Property Act, 1874

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Are you looking to purchase a life insurance policy to financially secure your wife and children in case you are no more? But what if your wife and children don’t get even a rupee out of the proceeds when they need it the most? This can happen if you have an ongoing home loan or a business that has incurred debts. In such a situation, the sum assured can be claimed by your creditors or attached by the court for repayment of your debts. But there’s good news: You can avoid this by simply buying your life insurance policy under the Married Women's Property Act, 1874.

What is the Married Women's Property Act, 1874?

The Married Women's Property Act, 1874 (“MWPA”) was created to secure the assets owned by a woman against her husband, his creditors and relatives. Section 6 of the MWPA covers any insurance policy taken out by a man on his own life in favour of his wife and children. So, if you’re buying a life insurance policy under the MWPA for the benefit of your wife and children, the sum assured will always be their property. It cannot be claimed by your lenders nor will it be considered a part of your business assets (or estate).

Section 5 of the MWPA states “Any married woman may effect a policy of insurance on her own behalf and independently of her husband; and the same and all benefit, thereof, if expressed on the face of it to be so effected, shall ensure as her separate property, and the contract evidenced by such policy shall be valid as if made with an unmarried woman.”

As per MWPA, every insurance policy that’s covered under the MWPA is automatically considered as an individual trust with the beneficiaries as trustees. There is no need to formally create a trust or even a settlement deed for the benefit of your dependent(s) named in the policy.

Who can opt for insurance under MWPA?

If you are a resident of India and a married man, you can take an insurance policy under the MWPA. You can also purchase the policy if you are a widower or a divorcee—in such a scenario, you may name your children as beneficiaries. However, the benefit can only be availed while taking the policy, and that too if you buy the policy in your own name.

Whom can you name as beneficiaries?

The beneficiaries defined in a policy that is covered under the MWPA can be your wife alone, just your child or children, or your wife and children together. As a policyholder, you can assign specific percentages of the sum assured to each beneficiary or divide it in equal amounts. However, once the policy has been issued, you cannot change the beneficiaries. So when you appoint your wife as the beneficiary and in case you both divorce, your beneficiary (wife) will remain the same.

What else does the MWPA do?

As a policyholder, you cannot take a loan against the policies that are endorsed under MWPA. In case you’re surrendering a cash-value policy, the proceeds due upon surrendering will go to the beneficiaries. Also, if you survive the policy term, the maturity proceeds would still be paid to your beneficiaries. 

How to take an insurance policy under the MWPA?

The process of getting an insurance plan endorsed under the MWPA is very simple. All you need to do is fill up an addendum along with your insurance application at the time of taking the policy. You can ask your insurance agent for this addendum, or simply inform the insurer that you want to register the policy under the MWPA while buying the policy offline.

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