The uncertainty of life in this day and age has been a cause of concern for every individual, especially those with family and dependents. In the face of these uncertainties, it is essential that a person secures the financial future of their family. While the loss of life can never be repaired or eased, having financial security will ensure that the dependents are not left to fend for themselves after the demise of their loved ones. Having term insurance or life insurance is therefore not only a good investment option but has become a necessity today to ensure that all the financial obligations of the survivors are taken care of. However, there have been many cases when the claim under the term insurance taken is not given to the intended persons or is exhausted in repaying the existing financial obligations before reaching the rightful survivors to ensure their financial security.
In such cases, the Government of India has a legal provision that the claim proceeds of the term insurance or the life insurance reach only the immediate family. This is under the MWP Act. Given below is a brief discussion of the MWP Act and why it is important for any individual to buy term insurance under this Act.
What is the MWP act?
The MWP Act or the Married Women Property Act, 1874 is a legal provision provided to all married women in the country that protects their right to receive the claim benefits under the term insurance or life insurance plans. Life insurance plans can be taken under Section 6 of this Act. This will ensure that the claim proceeds are free of any financial obligations that are still to be settled (like loans) as well as cannot be claimed by any other person other than the person nominated and eligible to get the claim of the term insurance.
A policy under the MWP Act can be taken in the same manner as any other insurance. The only difference is that the policyholder needs to select the option for the same at the time of buying the policy. Once a policy is already taken, it cannot be included under the purview of the MWP Act. This policy can be taken only in the name of the proposer, i.e., the married man who can also be a divorced person or widower.
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Who can get the benefits of an insurance policy under the MWP Act?
The beneficiaries of the life insurance or the term insurance under the MWP Act are clearly defined. These beneficiaries can only be either of the following,
- Only the spouse of the insured person
- The spouse and the children of the insured person
- Only the children of the insured person (this includes both the natural as well as adopted children of the insured person)
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To safeguard the interest of the beneficiaries, the policyholders can appoint trustees that can ensure that the policy is executed effectively. It is not mandatory to appoint a trustee as in the case of beneficiaries as they have to be enlisted at the time of taking the policy. The eligible trustees for this case can be any individual, bank, beneficiary themselves, or any financial institution.
What are the pros and cons of buying term insurance under the MWP Act?
The MWP Act has been available to the citizens of the country for decades but it is not as popular. In order to understand it in a better manner, let us also consider the pros and cons of buying term insurance under the MWP Act.
- Pros of the MWP Act
Some of the benefits of getting term insurance under the MWP Act are mentioned hereunder.
- Claim proceeds of the term insurance taken under the MWP Act are free from any financial obligations. This implies that they cannot be attached for repaying the dues of the insured person post their demise.
- The beneficiaries under the MWP Act are clearly defined. Hence, these proceeds cannot be contested by any other person other than the nominee or the beneficiary (even the parents of the policyholder).
- The provisions of the MWP Act also apply to a divorcee or a widower.
- Cons of MWP Act
After learning the key benefits of buying term insurance under the MWP Act, let us now move on to the disadvantages of shortcomings of the same.
- A person can take term insurance under the MWP Act only at the time of buying the said insurance.
- A policy already taken cannot be converted or included to be under the MWP Act.
- A policy under the MWP Act can be taken only by a married person and not otherwise.
Conclusion
The merits of taking term insurance under the MWP Act can ensure that there is additional protection for the immediate family of the policyholder to secure their financial future. The proceeds from the term insurance are the sole property of the nominee or the beneficiary even if they are in the nature of maturity proceeds. They cannot be considered to be part of the estate of the policyholder even in the latter case. Despite these benefits, buying term insurance under the MWP Act is not as popular and the lack of awareness is the root cause for the same. It is important that potential customers or policyholders should be aware of the MWP Act to protect their families from conniving relatives, creditors, and other persons wrongfully claiming the benefits of term insurance.
FAQs
The beneficiaries of term insurance under the MWP Act cannot be any person other than those mentioned as per the Act.
No. For the life insurance or term insurance to be under the purview of the MWP Act, it has to be done at the time of buying the insurance.
No. The beneficiaries of the insurance taken under the MWP Act cannot be altered or changed at a later date or at any point.
Lack of awareness of the Act and its provisions is the key reason for the term insurance under the MWP Act not being as popular.
No. The policyholder is not allowed to take any loans against the term insurance taken under the MWP Act.
