What all married women should know: Benefits of husband buying a policy under MWPA

What are the benefits of getting your husband to buy a life insurance policy endorsed under the MWPA? This is something all married women should know.

Section 6 of the Married Women's Property Act (MWPA), 1874, provides that 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.

This simply means that any insurance policy taken by the husband on his own life and endorsed under the MWPA in favour of his wife or children or any of them, will always be their property. None of the husband's creditors will have any right over the policy. Even the husband's parents will not have any right to the benefits. In fact the husband himself will also not have any rights to survival benefits of the policy, if any. As per the Act, as long as any of the beneficiaries named in the policy are alive, no one else will have any right to the benefits.

Thus the MWPA provides a simple method by which a married man can ensure that the benefits of his dependent(s) named in the policy are protected without formally creating a settlement deed or a trust. As per the MWPA, a trust is automatically created with the beneficiaries as trustees without the formal procedure of creating a trust.

Who can use this method? Any married man residing in India (except Jammu and Kashmir) can avail benefit under this Act. 'Married man' here also includes a widower and a divorcee who can name his children, if he wishes, as beneficiaries in a policy endorsed under this Act.

How to obtain this benefit? This can be obtained easily without much cost. All the buyer needs to do is inform the insurance company at the time of taking the policy that it has to be endorsed under the MWP Act. This benefit can ONLY be obtained while taking the policy. NO changes are allowed later on.

Advantages for the married woman:

The advantage is that the final beneficiary is defined and absolutely determined at the time of taking the policy. Further, as mentioned above, under the MWPA only the wife and children can be named as beneficiaries. Consequently, no other family member or any other heir can lay a claim to the policy benefits.

A married woman living in a joint family set up can use this method to ensure that the financial benefits of her husband's insurance policy are secured for her and her children by getting him to buy the policy under the MWPA and name his wife and children as beneficiaries. This is particularly relevant in a joint family as there can be other claimants to the policy proceeds in case of demise of the insured.

It is to be mentioned here that a husband can also name his wife and kids as beneficial nominees in a life insurance policy not taken under MWPA. Once beneficial nominees are named no one else can challenge their right to the death benefits of the policy. However, the beneficial nominees so named can be changed during the tenure of the policy. This means that in case of divorce or under the influence of other family members the husband can change the beneficiaries of the policy at a later stage.

In case of policies endorsed under the MWPA, the beneficiaries are mentioned in the policy via endorsement instead of nomination of nominees. Unlike in the case of beneficial nominees, the beneficiaries mentioned in a policy endorsed under the MWPA cannot be changed after the policy is issued. Thus, even if the husband and wife divorce after the policy is taken, the beneficiaries (wife and/or children) will continue to remain the same.

Maturity/Survival benefits: Further, if the policy taken under MWPA is is a cash value policy which has survival or maturity benefits, then even if the husband survives the policy term he would not receive them. Instead the beneficiaries named in the policy will receive the benefits. This applies irrespective of whether the policy is money-back or endowment or whole life or ULIP. In case of policies (not under MWPA) where beneficial nominees have been named, any survival/maturity benefits will go to the policy holder if he survives the policy term and not to the beneficial nominees.

Paid-up value of policies: It is to be noted that in case of a cash-value life insurance policy, after the first few years (as specified in the policy) premiums are paid, the policy acquires a 'paid-up' value. This means that even if the policy holder stops paying the premium, the policy does not totally lapse and become zero, instead it acquires a reduced paid-up value. Consequently, if held till maturity the policy would yield reduced maturity benefits which would be payable to the beneficiaries as per the endorsement on the policy under the MWPA.

Surrender Value: Additionally, in case the policy holder decides to surrender the cash value policy for any reason, the amount payable upon surrendering will be paid to the beneficiaries defined in the policy as endorsed under MWPA.

Thus, in case of life insurance policies taken by married men under the MWPA, the benefits in all situations - death, survival, paid-up policy, surrender - would go only to the beneficiaries named in the policy.

By Foram ShahThe author is a Certified Financial Planner Tomorrow Maker

Read more at:
//economictimes.indiatimes.com/tomorrowmakersshow/49469332.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst