MWP Act - Marriage Women's Property Act in Term Life Insurance

The Married Women's Property Act, 1874 or the MWP is a legal safeguard available to protect the financial interest of a dependent wife, children or both in case of sudden demise of the policyholder. The MWP Act is applicable on term insurance and life insurance policies to ensure that the sum assured is protected for use of only wife/child/children or both (wife and children) and no other liability (loan payoff, debt payoff, joint family rights etc. ) is attached to this sum

What is the MWP Act?

Women's rights in India have always been an issue, when approached from a social, political or legal perspective. This is because women in familial roles (mothers, daughters, sisters and wives) are often dependent partly or wholly on the men of the family and rarely exercise any right over their own assets. This often leads them to be victims in property disputes and more often than not, women are left penniless without any financial security for herself or her dependent children.

Hence, the Married Women's Property Act, 1874 or the MWP was enacted to curb this injustice. The Act ensures that a married woman in India has a separate and sole right to her property. The MWP Act thus dictates that a married woman's separate property cannot be owned/used or claimed by anybody else, not even her husband, parents, in-laws, children or brothers. It is a legal safeguard for a woman's assets which assures her and her dependents' financial safety and is avail.

The MWP Act, 1874 was amended in 1923 to include life insurance policies made out in the name of the married woman or her children or both and Section 6 of the MWP Act reads :

"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. "

Hence, the MWP Act entails that if a married man, including a divorcee or a widower, buys life insurance plan with the MWP addendum, the insurance benefits upon maturity or death are the sole property of nominated beneficiaries and no one else, including the policyholder himself, has any right over these benefits.

The entire sum is treated as separate from the policyholder's estate and hence, these benefits cannot be used for repayment of debt or loan or form part of joint family property, in case of untimely death of the policyholder.

How Does The MWP Act Protect My Family?

Life insurance is a must for everyone today. The unpredictability of life has become even more apparent since the pandemic, which makes financial security of our family a top priority. Term insurance policies are the simplest life insurance policies, with only a death benefit paid to beneficiaries upon demise of the policyholder whereas life insurance policies also offer a savings component and survival benefits upon maturity.

However, many times, beneficiaries or dependents fall prey to creditors, greedy relatives or loan hawks who try to snatch the 'insurance money' for repayment of loan or debt. The MWP Act creates a trust in the name of the beneficiaries, ensuring that only the insured wife and children receive the money. There are several benefits to buying insurance with MWP Act, such as:

• The insurance policy can be bought only to insure your wife and children. The beneficiaries must be decided at the time of buying policy with an MWP addendum and cannot be changed later.
• Insurance under MWP Act, 1874 is valid for people of all religions. In case of Muslim man as policyholder, he must take out named policies for children and wife.
• Policyholders can divide policy proceeds per beneficiary. It can be divided in equal amounts or divided in specific percentages. The percentages must be decided at the time of buying policy under MWP Act and cannot be changed later.
• The insurance policy under MWP Act, 1874 acts as a trust and there is no need to set up a separate trust for beneficiaries. Policyholders may assign a trustee to overlook the proceeds but it is not compulsory. At the time of claim, only the trustees can claim the benefits. The policy cannot be claimed by creditors or relatives or be made part of the will of the policyholder. It is a separate trust meant for the wife and children only.
• If the policyholder is a salaried individual with a home/ personal loan or a businessman with pending debt, upon his sudden demise, the creditors have first right over assets and insurance benefits are claimed to pay off outstanding debt.
  However, any and all term policies which fall under the MWP Act do not form part of this right and no creditor can make a claim on it. Insurance benefits with MWP addendum are only available to your wife & children, thus securing them in a watertight policy.
• If the policyholder resides in a joint family or is part of a Hindu Undivided Family (HUF), term policy with MWP addendum ensures that wife & children are protected, in case of family property disputes arising due to division of property or any joint family dispute.
  This is because any insurance policy under the MWP Act does not form part of individual policyholders or joint family property. It has a clear, single title awarded to the nominated beneficiary, i.e, the wife and/or children.
• Since the title in an insurance under MWP has a single title, it cannot be claimed by any relative or guardian, acting on behalf of beneficiaries. The nominated beneficiaries, decided at the time of buying policy cannot be changed and are the only recipients of insurance benefits.

Benefits of Buying Insurance with the MWP Act

Besides non-disruption of the Women's Property Rights in India, some other popular benefits of buying insurance with the MWPA (MWPA full form- Married Women Property Act) :

• Safe from an outside claim: Such a policy cannot be claimed by relatives of a policyholder as it is specifically meant for the benefit of the wife and children only.
• Safe from creditors after sudden death: If the policyholder leaves behind any outstanding loans and debts, creditors cannot claim for settlement on the term policies that are protected under MWP Act.
• Safe from any misunderstandings: Policy under MWP Act cannot be made part of the will of the policyholder as the insurance under MWPA acts as a separate trust.
• Safe from any dispute: If the policyholder is living in a joint family, a policy with MWPA insurance addendum will protect the wife and children of the policyholder in case of any family dispute.

Who Can Opt For Insurance Under MWP Act?

Without interfering with Women's Property Rights, a married man, a widower, a divorcee, or a married woman can opt for insurance under MWP Act. A married woman can ensure the security of her children by opting for insurance under MWPA. Following are the types of people who should opt for the MWP Act in insurance in case of the demise of the policyholder :

• Business owners with accumulated debt
• Salaried individuals with outstanding loans
• Members of Joint Family and HUF
• Policyholders with unstable or irregular income

Who can you name as beneficiaries in Insurance under MWP Act, 1874?

The beneficiary can only be :

• wife/child/children (natural & adopted), or
• only wife, or
• only children (atural & adopted).

In no case, the husband or any other relative can be a beneficiary under this policy, even if the husband maintains and pays premiums of the policy.

Beneficiaries, once decided and nominated will remain unchanged throughout the course of the policy.

In case of divorce, the wife continues to remain a beneficiary and cannot be changed.

In case of early demise of the beneficiary wife, the legal heir of the policyholder is eligible to claim insurance amount. Hence, it is important to declare more than one beneficiary at the time of buying policy.