Why You Should Buy Life Insurance Through The MWP Act? Learn Now

You purchase a term life insurance policy with the intention to secure your wife and family’s future in case of any unforeseeable circumstance. However, a simple life insurance policy might not necessarily guarantee that. What we mean is, in the case of death, it is possible that your life insurance’s sum would not go to your beneficiaries or nominees, namely your immediate family. It could instead be claimed by relatives or creditors.

It’s quite daunting to even think about such a possibility, is it not? How can you then specifically protect the future of your wife and children?

We have an easy solution for this. Buy a term life insurance policy under the Married Women’s Property Act, 1874 (MWP Act). Read on to know more about this act, and life insurance policy under it.

What is the MWP Act?

If you’re a married male policyholder, buying term life insurance under this act ensures that in your absence, the assured sum is passed on to your wife and children to protect their financial interests. Life insurance policy under this Act prohibits the Courts from using this policy to repay your debts in the event of your demise.

Section 6 of this Act states, “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.”

How does it protect my family?

When buying life insurance under the MWP Act, you are essentially creating an asset for your family in the case of your death. Only your wife and children, wife alone, or children alone, hold exclusive rights to your policy. They cannot be superseded by anyone else.

This is very different from a normal term life insurance policy, where the total sum can be used to recover debts. This can be done by paying creditors, paying off government liabilities, and any other debts of the policyholder.

For example, Harshad Mehta, the famous Indian stockbroker, bought his life insurance policy under the MWP Act in 1992. At that time, this option was not common knowledge. Due to this, his entire insurance money of approximately 10 crores went only to his family, despite all the liabilities and debts he had.

Do note that only your family has a right over this policy. Hence, even you cannot use it as collateral for any loans.

How to buy life insurance under MWPA?

The process is fairly simple. In the initial stage of purchasing life insurance, many sellers offer an option of ‘buying it under MWP Act’. Ticking that section is all you need to do. However, if that is not available, you can also fill out an addendum and attach it to your insurance policy application.

You can change the trustees at any given point of time. But, the beneficiaries mentioned in the policy document cannot be changed. At Tailwind we have the expertise to advise you on your insurance policies to identify and address all these benefits and more to give you a seamless and smooth experience.