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.
Hi, Thank you very much for your prompt reply.
We are sorry to hear about the loss, Mr. Rao.
The basic condition on MWPA is that the spouse (and/or children) can be the nominee. Since in this case the father was the nominee, there is no question of MWPA being applied.
Also, as you rightly mentioned, as per the new norms, the claim amount will go the nominee and not the legal heirs unless it is proven by the legal heir that the claim amount is not beneficial to the nominee. Please read the article in the link below to understand this comprehensively.
https://www.mintwise.com/blog/nomination-in-life-insurance/
Hope this resolves your doubt, Mr. Rao. Do let us know in case you need any further help/information.
Hi, One small clarification requested, my brother’s elder son expired recently. He had life insurance policies and opted nominee as my brother. These policies were taken before the marriage. My brother’s son has not changed the nominee after marriage. He survived with wife and 2 daughter at the time of his death. As per new insurance amendment act 2015, it is understood that only nominee will get the death insurance claim and other legal heirs will not have any rights on the claim amount. Here I confused in respect of MWPA. Is this act is applicable in this case or not and who will get the insurance clime amount.
S RAo
Given the details you have mentioned, especially since you are not a business person, you are not likely to have debts that will spill over to your personal properties. So MWPA is not applicable to you, Captain.
I want my parents to be nominee and after I marry, I want my wife as nominee also. Should I go for policy under MWPA or not? I am confused. My parents are good and not like evil as shown in hindi movies. And apart from my parents, wife and my childrens, I don’t want money to go to anybody else. I am not a businessman. Also tell me, if under MWPA, is there threat of my parents not receiving the money? Like my wife will take over the money and not give to my parents? I do not want this. Should I take MWPA or not?
Anand, you are absolutely right. Like we mentioned in the article, this law came in 1874 and has been there since then. In spite of there, there is little awareness. This article was written with the objective of telling everyone. Let’s spread the word, that’s what the internet does best!!!
this makes a lot of sense.. i wonder why so less people use it… in fact not even the insurance companies executives are aware of it.. what could be the reason?
Excellent ! Very good article. Thank you MintWise.
Excellent ! Very good article. Thank you MintWise.
very useful information. nobody knows about this. will be telling my friends also. thanks for this advise.
very useful information. nobody knows about this. will be telling my friends also. thanks for this advise.
You got that absolutely right, Prashant.
You got that absolutely right, Prashant.
Thanks MintWise… This gives more clarity … In all cases the creditors do not have access to sum assured.
Regards
Prashant
Thanks MintWise… This gives more clarity … In all cases the creditors do not have access to sum assured.
Regards
Prashant
Prashant,
In case all the nominees die, in general it will go to the next legal heir of the nominees (not yours because you do not have any right on the policy). Typically this means it can go to the nominees’ Class 1 legal heir, i.e. mother, spouse and children. In case they are non-existent, it goes to the Class 2 legal heir, i.e. father, siblings, living children’s grandchildren and sibling’s children, among others. You are advised to take a proper opinion on this depending on your own case.
If the nominee is a minor, an appointee can be the caretaker of the money till the child attains adulthood (18 years of age)
Prashant,
In case all the nominees die, in general it will go to the next legal heir of the nominees (not yours because you do not have any right on the policy). Typically this means it can go to the nominees’ Class 1 legal heir, i.e. mother, spouse and children. In case they are non-existent, it goes to the Class 2 legal heir, i.e. father, siblings, living children’s grandchildren and sibling’s children, among others. You are advised to take a proper opinion on this depending on your own case.
If the nominee is a minor, an appointee can be the caretaker of the money till the child attains adulthood (18 years of age)
hi .. one quick question on MWPA nominees, as it said it can not be changed once declared. What happens all the nominees are expired… who will get the claim benifit. Also if the Nominee is minor?, what is the process
Thanks
Prashant
hi .. one quick question on MWPA nominees, as it said it can not be changed once declared. What happens all the nominees are expired… who will get the claim benifit. Also if the Nominee is minor?, what is the process
Thanks
Prashant
This is great piece of information. I asked the insurance company about it. Unfortunately they were themselves not aware of it. But later on they found out about it and confirmed it. Thanks to you, this will make a big difference. God bless you all!!!!
This is great piece of information. I asked the insurance company about it. Unfortunately they were themselves not aware of it. But later on they found out about it and confirmed it. Thanks to you, this will make a big difference. God bless you all!!!!
Very informative article. Thanks a lot.
Very informative article. Thanks a lot.