Policies Under The Married Woman Property Act
The Married Woman Property Act gives an opportunity to the policy holder to ensure that his wife and children, for whose benefit he is taking an insurance policy, are not deprived of their rights in any way. Life Insurance is a tool for financial protection but the whole purpose of life insurance gets defeated if the policy money does not go to family of the policy holder , in case of his untimely death , but gets attached and blocked in any way.
During his lifetime , a person can take a loan , which for some reason , he may face difficulty in repaying or the loan may remain unpaid at the time of his untimely death. Again he may also run into dispute with the Tax authorities. Now as a life insurance policy forms a part of the estate of an individual, the same can be attached by the bank / lenders or by the Govt Tax department to realise the dues of the male policy holder.
It also needs to be noted that appointing a nominee in a life insurance policy , only makes the process of claim settlement easier but the nominee does not get absolute right over the policy on the death of the policy holder. If a policyholder has more than one heirs, then any of the other heirs who are not nominated can move a court of law to get a proportionate share of the death claim, since the policy also forms a part of the estate of the deceased policy holder and all his heirs have a lawful right over the same.
In all the above problematic circumstances, the right of the beneficiary for whose financial security the policy is taken may get affected and the remedy for all these problem lies in endorsing a life insurance policy under the MWP Act, at the time of its inception. Now let us see what the law states ...
Section 6 of the Married Women's Property Act, 1874, (M.W.P. Act), 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.'
It may be noted that the term 'children' in Section 6 of the said Act means sons and daughters by blood and in case of Hindus it also includes adopted sons and daughters.
Hence by endorsing a policy under the MWP Act , at the time of issuance, a married man can ensure that the benefit of his dependant(s) named in the policy as 'beneficiaries', are fully legally secured and protected without formally creating a settlement deed or trust.
MWP Act policies can be issued to all married men in India except those residing in the state of Jammu and Kashmir. In this case a 'married man' also includes a divorcee or a widower.
All types of life insurance policies , like term insurance, endowment, ULIPs etc. can be taken under the provisions of the MWP Act. This law can be applied even for online policies. Policies can be taken under the provisions of the MWP Act , only at the time of inception and cannot be brought under the preview of the said Act later.
How to obtain policies under sec 6 of MWP Act ?
The process of obtaining policies under the MWP Act is very simple. The proposer, who should be a married man as stated earlier, should inform the insurer and fill up an MWP Addendum form, at the time of starting the policy. In case of MWP Act policies, there will be no 'Nominee' and the proposer needs to mention only the 'Beneficiaries'.
The beneficiaries under sec 6 of M.W.P. Act policies can be :
a) The wife alone, or
b) Any one or more children , or
c) The wife and any one or more children.
If there are two or more beneficiaries, they may be given equal shares or specified unequal shares.
Appoinment of Trustee :
For securing and taking care of the rights of the Beneficiaries, the MWP Act mandates the appointment of Trustees. Any person can be appointed as Trustees , including an Institution like Banks. The beneficiaries themselves can also be appointed as Trustees. If necessary, the proposer can change the Trustees.
Effect of Endorsing a Policy under the MWP Act :
When a policy is issued as per the provisions of the MWP Act, it does not remain a part of the estate of the proposer. Hence the policy cannot be attached for loan default by any bank or financial institution, from where the proposer has taken any loan or has become a Guarantor . Similarly the policy cannot be attached by the Income Tax department or any other Tax authorities for any default in paying taxes.
All claims and benefits under the policy like Death Claim , Maturity Claim and Survival Benefits will be payable to the Beneficiaries mentioned at the time of inception. Other heirs and family members of the proposer cannot lay claim to the policy benefits and cannot challenge the right of the beneficiaries , in a court of law.
The policy cannot be surrendered or assigned and no loan can be taken under the policy.
The MWP Act provides a very simple and low cost method , by which the financial protection of the dependent beneficiaries like wife and/or children can be fully safeguarded , while taking a life insurance policy.
In legal terms, it can be said that by invoking the provisions of The MWP Act, a life insurance policy becomes 'free from all encumbrances in the hands of the Beneficiaries'.