So you have bought a term insurance and are stress-free that your family is protected. But what if we told you that it’s only half the work done. Of course, buying a term plan should be on everyone’s financial goals but how do you ensure that only your family gets benefitted from it after you are gone?
Confused? Let us give you an example: Mr. Kumar’s demise has left his family in an emotional turmoil but Mrs. Kumar is relieved that his insurance policy will mature soon and the proceeds will tide them over their financial burden. Soon after, she finds that their only hope, the insurance policy proceeds, is now the legal property of her husband’s creditors – because he had borrowed money from them while he lived. Now this could have been prevented had Mr. Kumar taken leverage of a legal safeguard called the Married Women Property Act.
What is the MWP Act?Married Women Property (MWP) Act 1874 protects a woman’s property from relatives, creditors, and other miscreants. Insurance plans are covered under Section 6 of the MWP Act, which ensures that a policy availed under the MWP Act by a husband may not be attached by courts for repayment of their debts. Only his wife and children shall be entitled to the Sum Assured in the event of his demise.
Why should you buy a term insurance under the MWP Act?A lot of times, after the death of a loved one, there is a dispute between family members on who will inherit the money left behind. The same can apply to the claim amount of a term insurance plan – multiple people can lay claim to it. Then there may be wrongful creditors (people who you may have borrowed money from in the past) who can claim the amount left behind for your family by a term insurance plan. Buying a term insurance under the MWP act makes sure that the money you intended your family to have in the event of your death is used by them and them alone. No other person can have access to that money.
If you are a salaried employee with a home/ personal loan or own a business and have accumulated debts, MWP Act will prevent your creditors to have the first claim on the Sum Assured in case of your demise. You may also want to avail this benefit if you live in a joint family setup; a policy under the MWP Act will not let complications in the ownership of property or family disputes over money to rob your wife and children off their rightful claim on your term insurance proceeds.
How does buying a term insurance under the MWP Act ensure that only my wife and kids have access to the money?When you buy a term insurance under the MWP act, you are creating a trust. You have to then add your nominees (wife & children) as trustees. Only the trustees will have access to the trust i.e. the money and no other person can claim the amount.
How do you buy a term insurance under the MWP Act?When you buy a term insurance online, you will be asked a question on whether you want to buy it under the MWP act. All you have to do is select “Yes”, then add the details of your nominees as trustees and proceed to buy the plan.
Can you add an existing term insurance policy under MWP Act?Alas, you cannot. You have to opt for a term insurance under the MWP act at the time of application (buying the term policy). In case you already have a term insurance policy and you want one under the MWP act, there is no other choice other than opting for a new term insurance policy and taking that under the MWP act.
Also, there is no any extra charge for buying a term insurance under the MWP act. It is totally free and should be taken advantage of.
Bottom line: While buying a term insurance plan proves that you are financially savvy, buying it under the MWP Act ensures that only your family has access to the claim amount – enabling you to secure their future against people who might have fraudulent intentions.
Disclaimer: **The quotes are indicative and TIL bears no legal liability for the calculation.