Do you have any life insurance? And are you really very sure that it will protect your family?

Majority of people who buy life insurance in India, buy it for the sole reason of protecting their family’s future. But is taking the life insurance a sure shot way to protect your family (I mean your immediate family here, which is spouse + kids)?.

If the primary breadwinner dies because of any reason, the family will have to suffer in absence of a regular income. The spouse will suddenly not get any income and might have to start earning. Your family and kid’s future is also at risk.

Let’s see some risk your family has 

1. What if you are businessmen and you owe money to someone? After you are dead, the creditors will approach the court and they will get the money out of your life insurance proceeds
2. Consider you have a big home loan which you have not accounted for while taking a term plan. If you die, the first right will be of the home loan lender because the loan is on your name. The right of the family comes only when your loans are paid off.
3. What if you have not created your will and there are family members who claim their right in your life insurance proceeds?
4. What if you yourself change your mind later and don’t want to give the insurance proceeds to your own family?

Are you prepared for this situation? If not then think about it. There is a way which will help you at some points if this such situations appears in-front of your family in your absence and the solution is MWP Act.

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Have you heared about MWP Act?

MWP means Married Women’s Property Act. This act is prepared by taking into consideration the rights of a married woman on her property. According to MWP Act . the earning of a married woman in India is considered as her own property and this Act Protects the property owned by a woman from Creditors, relatives and even from their husbands.

Buying Life Insurance Policy under MWP Act

MWP Act 1874 under which Section 6 deals with life insurance. If you buy a life insurance under MWP Act, then it will protect the women’s right on the life insurance proceeds money in all the cases. Even the husband can’t do anything about it once the buying is bought under MWP act. This applies to all kind of insurance policies be it a term plan or an endowment/money back plan.

Who can be the Beneficiary and Trustee?

When a policy is bought under MWP Act, the policy is treated as a TRUST and its guarantees that the proceeds from life insurance policy are free from any creditors or court attachments.

The first right is of the family only (women and kids). Imagine if you buy an endowment plan which matures in 20 years and you bought it under MWP Act. Once the policy matures, then even the person who started it will not be able to claim anything. The first right will be of the beneficiaries mentioned in the policy.

Beneficiaries can be:

• The wife alone
• The child/ children alone (both natural and adopted)
• Wife and children together or any of them

Trustee can be:

Unlike beneficiaries, having trustee is not mandatory for this MWP Act. The policy holder can mention one or more trusties. Having a Trustee is not compulsory but if the beneficiary is minor then in that case it is compulsory to have a Trustee. The Trustee should not be minor. The Trustee can be change whenever the policy holder wanted. The Trusties can be –

• A person
• A bank
• An institute
• Beneficiary herself/himself

How will the beneficiaries get benefit ?

When something wrong happens with the policy holder and the insurance is claimed by the family, the creditors can claim for the insurance benefits. In this case the family members will get less benefit of the policy. Or sometimes the other family members can also claim for the part in that policy if the policy holder does not have will.

But if the policy is covered under MWP Act then the whole benefit will go to the wife or kids (whoever the beneficiary is) of the policy holder.

Procedure to buy life insurance under MWP Act

The process is very simple. All you have to do is fill up a MWP addendum form separately at the time of buying the policy. Your agent can help you with that form or talk to the company in case you are directly buying it from the insurer.

However note that it can’t be added separately once you have completed the process of buying the life insurance (means you can’t add the MWP act later)

Who can take a Life insurance policy under MWP act ?

Any married man can take a life insurance policy under MWP Act. This includes divorced persons and widowers. The policy can be taken only on one’s own name, i.e., the life assured has to be the proposer himself. Any type of plan can be endorsed to be covered under MWP Act.

Difference – Insurance With MWP and Without MWP

There is not a lot of difference in taking a life insurance under  MWP Act or without MWP Act but we can see some points which shows the difference. See the following picture.

Are there any disadvantages of buying policy under MWP Act?

Yes, There are disadvantages to signing the MWP addendum as well

• The Beneficiaries cannot be changed. In case at some point you decide to change the beneficiaries . It won’t be possible if you sign a MWP addendum.
• Loan cannot be taken on the basis of the policy. The policy could not be used as a security against loan.

That makes it also necessary for loan providers on Life Insurance policies to check before taking it as a mortgage for lending whether the policy does not contain any MWP addendum, as they will not get the benefits from its proceeds.

Let me know if you want to know more about this?