MWP act in Life Insurance

When an unfortunate incident happens, Your term life insurance claim money may not reach your nominee or beneficiary in the below cases:

• If claimed by creditors of the policyholder, when he has outstanding debts or liabilities at the time of his death.
• If the claims form part of the policyholder’s estate and are subject to claims from relatives, in-laws, or even the policyholder himself.
• If the Term Plan is attached for repayment of loans or debts after the policyholder’s death.

What is MWP Act?

The MWP Act means (MWP Act Full form), Married Women’s Property Act, 1874—is a legal provision in India that allows a married man to buy a life insurance policy on his own life specifically for the benefit of his wife, or his wife and children. When a life insurance policy is taken under the MWP Act, the sum assured and any policy proceeds are legally protected and can only be claimed by the named beneficiaries (wife, or wife and children). 

The policy, once endorsed under the Married Woman property Act in india, is considered a trust for the benefit of the wife and/or children. The policyholder cannot change beneficiaries after the policy is issued, and even in the event of divorce, the original beneficiaries retain their rights.

How does the MWP Act protect your family?

A term policy under the MWP Act is treated as a trust, controlled only by trustees for the benefit of the insured’s wife and/or children. In case of death, only the trustees can claim the policy proceeds—creditors, relatives, or even the insured’s will cannot access them. This ensures your family’s financial security, even if you have debts(Loans). The beneficiaries (wife/children) cannot be changed later, and the policy is protected from creditors or family disputes, guaranteeing your loved ones receive the benefits.

Who should choose the MWP Act?

• Business owners and salaried individuals with loans or liabilities
• Anyone wanting to safeguard their wife and children from creditors or relatives with possible bad intentions

Since Term Life Insurance can provide significant financial support for your family, it’s wise for anyone buying such a policy to secure it under the MWP Act for their loved ones’ protection (MWP Act Term Insurance).

How to avail?

To secure a policy under the MWP Act, the policyholder must fill out a specific addendum at the time of purchasing the policy. This cannot be done later.

Who can benefit from MWP Act?

Beneficiaries can be the wife alone, the child/children alone, or both wife and children. The policyholder can specify the share of each beneficiary.

Disadvantages of MWP act :

1. Irrevocable Beneficiaries:
   Once beneficiaries (wife and/or children) are named under the MWP Act, they cannot be changed or removed later, unlike regular life insurance policies.
2. Limited Beneficiaries:
   Only the policyholder’s wife and children can be beneficiaries; other dependents like parents or siblings are excluded.
3. Applies only while taking the Policy (at Inception):
   The MWP Act can be applied only when purchasing a new policy. Existing policies cannot be converted under this act.
4. No Loan Facility:
   Policies under the MWP Act are ineligible for loans, limiting access to funds during the policy term. 
5. Loss of Control:
   If a trustee is appointed, the policyholder may lose some control, such as needing the trustee’s consent for policy surrender.
6. Fixed Beneficiary structure may become Unsuitable:
   Changes in family dynamics (e.g., divorce, birth of more children) do not alter the fixed beneficiaries, which may cause complications.
7. No Assignment for Existing Policies:
   To benefit from the MWP Act, a new policy must be purchased; existing policies cannot be assigned.

Summary:

The MWP Act is a powerful legal safeguard that ensures the life insurance proceeds are exclusively for the financial security of a married man’s wife and/or children, unaffected by his debts or family disputes. While the MWP Act secures financial protection for wife and children, the limitations should be carefully weighed before opting for it.

Regards,

Honvest Team.