Understand the Rules of Married Women Property Act in Life Insurance
In India, the number of male breadwinners is still higher than that of women, which is why life insurance plans have become even more essential. When you buy a life insurance policy, such as a term plan you ensure that your spouse and children remain financially secured even in your absence. However, in case of an unfortunate event, your creditors may demand that your wife repays the dues using the life insurance cover. This is where the Married Women Property Act, 1874 can help protect her financial future.
What is the Married Women Property (MWP) Act?
According to the MWP Act, the earnings of a married woman and any property that she owns belong to her. Any return from investments earned by the woman will also be her sole property. Section 6 of the Act extends its protection to life insurance policiesas well. If the husband buys a life insurance plan, such as a ULIP, in which his wife or children are the nominees, the benefit will solely belong to them. Neither the husband nor his creditors can claim any part of it.
Importance of MWP Act protection while buying life insurance
Buying a life insurance policy under the protection of the MWP Act comes with many benefits. Below is a list of the most prominent ones.
- The benefit of the policy belongs only to the wife and children. As the husband or his creditors do not have any right on it, the entire fund will always be available to the nominees
- The life insurance policy will ensure the complete financial security of the married woman and her children in case of an unfortunate event.
- The beneficiaries have the right to surrender the life insurance policy
- The policyholder reserves the authority to cancel the appointment of trustees
- The policyholder cannot take any loan against a life insurance plan protected under the MWP Act; this safeguards the financial well-being of the family
- The policy’s maturity benefit is still paid to the nominees even if the policyholder survives the policy term
Let us study two examples to understand the importance of MWP Act protection while buying life insurance.
- Example 1
Manoj is the sole earner of his family, which includeshis wife and two children. His income does not allow any savings after paying bills and Equated Monthly Installments (EMIs) towards his home loan. To ensure his family’s future financial security, Manoj decides to buy a life insurance plan. The benefits of life insurance include a substantial sum assured in case of an unfortunate event. However, Manoj does not opt for the MWP Act, as he is unaware of it.
Three years after buying the policy, tragedy strikes the family, leaving the wife alone with her children. Even though she is entitled to get the sum assured from the life insurance policy, it does not help her, as the money is used towards the repayment of the home loan. This situation puts the family under grave uncertainties.
- Example 2
Rajat is a very sensible husband and father. He wants to make sure that his son gets the best possible life and education. He is the single earner, which puts all the financial responsibilities of the family on his shoulders. To protect the financial stability of his family, he bought a term insurance plan and opted for the MWP Act. He also used a life insurance calculator to find the most affordable policy.
Rajat has a car loan and a home loan, which do not let him save enough money for the future. However, he is not too worried about that. He knows that in his absence, the policy benefit will take care of his family’s needs, and the MWP Act ensures that his wife and children will receive the entire sum assured.
If you decide to buy a life insurance plan, ensure that you are responsible like Rajat, and opt for the MWP Act.