Insurance under Married Women’s Property Act

Buying insurance is a very important aspect of one’s financial strategy. Buying the right kind of coverage that is sufficient to cover one’s life is very important. The purpose of getting a life cover is to secure the financial future of the family in the event of the policy holder’s death. The other important thing is to let your family know about the policy and make sure that the documents are feasible in case of the insured’s death.

Beneficial Nominee

Nominating family members may not serve the purpose as nomination only ensures that the insurer hands over the death claim proceed to the nominees and the legal heirs may still lay claim on the proceeds.

There is a difference between a nominee and a beneficial nominee. A beneficial nominee becomes the receiver and the final beneficiary as well. A husband can name his wife and kids as beneficial nominees in a life insurance policy. The beneficial nominees so named can be changed during the tenure of the policy.  Mentioning the names of beneficial nominees results in a situation where no one else can challenge their right to the death benefits. 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.

What is buying life insurance under MWP Act?

The rights of creditors supersede that of the beneficial nominees. If the money is due to them, they can recover it from the proceeds of a life insurance policy. To avoid such a situation, you can buy a life insurance policy under section 6 of the Married Women’s Property Act. It gives special protection to the policyholder’s wife and children-preventing the creditors from attaching a life insurance policy taken under this Act. 

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. 

The act thus protects the rights of a woman to the proceeds of the policy and no one other than her and/or her children can claim the proceeds. Family members are also prevented from making claims just like other creditors. 

How to get a life insurance cover under the MWPA?

Any married man resident in India (except Jammu and Kashmir) can avail of the benefits under this act. , including a widower and a divorcee who can name his children as beneficiaries if he wants to in a policy endorsed under this act only if the wife and children can be named as beneficiaries.  This means that no other family member or any other heir can raise any claim to the policy benefits. If the husband and wife get a divorce after the policy is taken, the beneficiaries-wife and/or children will continue to remain the same. 

You can do so by following the steps given below:

1. File an MWP addendum while applying for insurance.
2. This will not require the creation of a settlement deed or a trust separately. 
3. The benefit can be availed of only while taking the policy. 
4. Any addition or changes in the endorsement of the policy under this Act is not allowed later on. This means that the husband/the insured cannot change the beneficiaries of the policy later. 

The effects of taking a policy under the MWP Act-

1. Once the insurance policy is taken by the husband and endorsed under this Act in favor of his wife or children or any of them. 
2. None of the husband’s creditors will have any right over the policy. The husband himself will have no rights over the survival benefits of the policy. His parents too will not have the right to the benefits. 
3. As long as the beneficiaries named in the policy are alive, no one else will have any right to the benefits. This is an important point because in the case of a joint family there can be other claimants. The policies taken under this Act are capable of avoiding legal hassles for beneficiaries. 

The MWP Act was a welfare act enacted in 1874 to ensure the absolute ownership of wages, earnings, property, investments, and savings of a married woman by which the husband cannot acquire any interest in any such property of the wife after the marriage. It was also meant to protect the properties owned by women from in-laws, relatives, and creditors. Thus, when an insurance policy is taken by a husband in the making his wife and children the beneficiaries, the death benefit or any other bonuses arising out of it are to be given to his wife and children only. 

When you purchase an insurance policy under this act, it will protect the family from debts and family disputes. 

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Krishna Rath is a SEBI Registered Investment Adviser, and since 2015 has been educating netizens on investments and insurance. Krishna is a fee only SEBI RIA and is Odisha's first SEBI RIA. With background in IT, Krishna is changing the advisory space with new innovations in AdvisoryTech.

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