If you are a businessman (especially with a proprietorship or unlimited partnership) and if you were to die with unpaid loans and debts, do you know that the creditors (and not your spouse or children) can sell off your land, house, shares, mutual funds, bank FD, cars, jewelry, etc. and will have the first right on the money received?
Haven’t you heard of families where relatives have fraudulently syphoned off all the insurance money received by the wife after her husband’s death? Sad, isn’t it?
Well this is definitely avoidable. In the context of term insurance, more than 99% of buyers in India have probably never heard of MWPA. And if you are in that group, you won’t believe how powerful MWPA is until you read this article.
MWPA (Married Women’s Property Act) was introduced in India in as early as 1874. The objective of the Act is simple yet powerful – protect the properties of married women in India, from creditors, relatives and even from their husbands and his creditors! 🙂 There is a Section 6 in the Act, which is specifically for insurance policies.
… 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.
* sons or daughters by blood, includes adopted children in the case of Hindus.
In simple words, for a policy under MWPA, any amount received as a benefit, whether it is an intermediary benefit, final benefit or a death benefit amount, can go only to the wife and/or children of the deceased person, and no one else even if the husband owed money to any institution, trust or person. It cannot be touched by anyone else, whatever be the circumstances.
MWPA for Term Insurance Plans
While the Act is applicable to all kinds of life insurance policies, in a term insurance plan, there is no question of any intermediary or maturity benefit. There is only a death benefit. Since the husband is dead, the natural beneficiary are his wife and/or children. So it is best to ensure that when you buy a term insurance plan, you buy it under MWPA. So in case you fear that relatives, friends or some creditors may try to usurp the money, rest assured that they can’t!
Eligibility of MWPA for Term Insurance
- Indian nationals residing in India (except J&K State)
- Married man, Widower, Divorced man
- Person applying (and paying) for term insurance has to be the Life Assured (i.e. on whose death the policy gives the life insurance benefit)
- For either (i) wife, (ii) any one or more children, (iii) wife and one or more children
Who can benefit from MWPA for Term Insurance
- Businessmen having loans
- Salaried who want to protect the welfare of their family under all circumstances.
- Those who want protection for wife/children from relatives who might have malafide intentions when it comes to high insurance amounts
Share of Benefit for Term Insurance through MWPA
If there is more than one beneficiary for a term insurance plan through MWPA, options are as follows.
- Equal share (50% each)
- Unequal specified share (e.g. 50% to wife, 25% to Child1, 25% to Child2)
- Joint share (100% held by multiple beneficiaries) in case of Mohammedans (Muslims) only
- You can even name beneficiaries as a class. e.g. “equal share for all my children”, so that even children born after the policy is bought (but not after you die) can be included. For Mohammedans (Muslims), however, class is not acceptable – all beneficiaries have to be named in the MWPA addendum.
How to buy a term insurance plan under MWPA
1. In addition to buying the term insurance plan, reach out to your insurance company and fill up the MWPA addendum. Important – do this at the time of applying for the term insurance plan itself, or definitely BEFORE the term policy is issued. Once issued, it cannot be converted to MWPA.
2. Each policy is considered a Trust (no need to create a separate Trust) and needs to have a Trustee. The Trustee has to be an adult at the time of applying for the policy. It can be the beneficiary itself, another individual or individuals, or even a Bank that does trustee business. The trustee’s consent has to be captured on the MWPA addendum. The Trustee can be changed at any time.
3. The beneficiaries cannot be changed once the term insurance policy is issued with MWPA.
4. Once a term insurance plan is converted to MWPA, it CANNOT be revoked or modified.
5. The term insurance plan with MWPA cannot be surrendered or assigned to any person or institution or company for a new or existing loan, now or later.
Remember that MWPA is free! No charges of any sort at any time. And all life insurance companies have to offer it. It is your right to ask for it.
One more thing. If you are a husband reading this article, please note that MWPA does not work the other way around, i.e. protecting the husband’s wealth from his wife creditors! So there really isn’t any escape from paying off your wife’s credit card bills! 🙂
To conclude, with the power of the MWPA, the law of the land is already in place for more than a 100 years, it’s now your turn to act and take full advantage of it.