Married Women’s Property (MWP) Act in Term Insurance

The Married Women's Property Act or MWP Act was first passed in 1874 and has undergone a number of amendments to expand its scope through the years. In its current form the act is designed to provide dependent married women with complete ownership of wages, property, savings, investments and earnings of their husbands. The main purpose of the MWP Act is to ensure the financial protection of women such as wives, mothers, daughters or sisters who are partially or wholly dependent on the earning male members of the family.

The 1923 amendment of the Act expanded the original scope of legal protection to include death and maturity benefits of life insurance policies in India. There are 2 separate sections of the Married Women's Protection Act that have significance with respect to life insurance policies in India ; Section 5 and Section 6.

Section 5 of the MWP Act features a provision that allows a married woman to purchase life insurance by herself. This means that a policy purchased under Section 5 of the MWPA ensures that the married woman and her nominees will have sole authority over any and all benefits provided under the policy.

Additionally, Section 6 of the MWP Act makes it legally binding that death or maturity benefits of a life insurance policy bought by a married man (including widower or divorcee) with the MWP addendum are the sole property of the nominated beneficiaries such as spouse, dependent children, etc.

Furthermore, the payout is treated separate from the estate of the policyholder. So the payout of life insurance policies including term plans covered under the Married Women's Property Act cannot be attached by creditors to repay outstanding debts or loans in the event of the policyholder's untimely demise. This legal protection is designed to minimize the financial or legal hardship that various financial dependents of the policyholder including homemakers with no alternate source of income might face after their husband's death.

Below are the key benefits that married women and/or dependent children receive from a policy purchased with the MWPA addendum:

• Ensures legal protection from creditors who might want to claim life insurance policy death/maturity benefit payouts to clear outstanding loans of the policyholder
• Married women who reside in joint families or part of HUF also get protection from family members who might be liable to claim a portion as part of the policyholder’s estate
• In case of maturity benefits, only the stated beneficiaries like spouse and/or dependent children can claim the benefit, not the policyholder
• The surrender value of a life policy bought under Married Women’s Property Act can also be claimed only by the stated policy beneficiaries and not the policyholder
• In the case of a paid-up policy too, only the stated beneficiaries are legally allowed to claim the policy payout at maturity
• Legal protection for beneficiaries of the policy as MWPA policies cannot be part of the policyholder’s will and have to treated as a separate trust.
• The above benefits remain in place even in the case of a divorce as policy beneficiaries cannot be amended at a later date

In order to receive the benefits under MWPA, the life insurance policy applicant needs to fill out a form known as the MWPA addendum along with the life insurance policy documentation to ensure that dependents such as their spouse and children get the legal protection provided by the Married Women's Property Act. Currently 2 different variants of the addendum are used by life insurance companies in India : The MWPA addendum form for male proposer and the other for female proposer.

There is also a similar but separate form in use, known as the MWPA Addendum form for female proposer addendum. This addendum form needs to be filled out by women who are purchasing life or term insurance policies covered under Section 5 of the MWP Act.

Upon purchase of a term insurance policy with the MWPA addendum, the death and/or maturity benefits of the eligible life insurance policy cannot be claimed by any person including the policyholder as the payout beneficiary can only be the spouse and/or dependent children of the policyholder.

Parents of the policyholder also cannot be beneficiaries of such MWPA-covered life insurance policies. One should also note this addendum has to be filled out and submitted at the time of policy purchase, under current rules it cannot be submitted for existing policies or amended by the policyholder at a later date.

The Married Women’s Property Act (MWPA), 1874, is an important legislation that provides enhanced financial protection to your wife and children in your absence, as mere nomination to the term insurance policy is not enough to secure the benefits.

Buying a term insurance policy under MWPA is essential owing to the following reasons:

• Financial Security

  An insurance policy bought under MWPA favours the wife or children. The husband himself and his parents will have no right on the sum assured or the policy's survival benefits. This means that the wife and children will be protected without any hassle in the absence of the husband.

• Protection of Assets

  The MWP Act helps protect your assets from legal threats by ensuring maturity benefits are paid only to the named nominees. Hence, it protects against external claims, enhancing the financial security of the wife and children.

• Safety Against Family Disputes

  If there is a family dispute over inheritance and estate matters after the husband’s death, the MWP Act in term insurance helps provide clear guidance on who the nominee is: the wife and the children. It ensures that the policy benefits cannot be claimed by anyone else but the beneficiary, providing financial support in case of the policyholder’s unfortunate demise.

• Financial Independence

  In most Indian households, women depend on their husbands’ income to meet their basic financial needs. In the event of the husband’s demise, the wife is left to manage her and her children’s finances on her own.

  A term insurance policy under the MWP Act guarantees financial security to the wife and her children, enabling her to manage the family’s finances independently.

• Estate Planning

  A term insurance policy with MWPA helps dependent women to plan the future of their children by participating in estate planning. This provides stability and long-term financial security to the family.

• Protection After Divorce

  The MWP Act ensures financial protection for women in case of their husband’s demise or after divorce. It ensures that the widow or divorcee has basic finances to meet her and her dependent children’s financial needs.

Registering a term insurance policy under MWPA is easy. However, you must register your term plan under the MWP Act while purchasing the policy. Follow these steps to register a term insurance policy under MWPA:

Step 1: Choose the Term Insurance

Compare term insurance plans offered by top insurance companies based on factors such as sum assured, claim settlement ratio, insurer reputation, benefits, and tenure. Then, select the best one which suits your needs.

Step 2: Fill the MWP Addendum

During the filing process, ask for the MWP Act addendum. You will be asked to provide the details of your wife and children so they can be named as beneficiaries, who will be legally eligible to receive the policy benefits.

Step 3: Document Submission

Submit the documents required by the insurance company. These documents should be genuine and valid, as incorrect information may lead to the rejection of the application.

Step 4: Premium Payment

After submitting the documents, pay the first premium – the amount you pay regularly to keep your plan active.

Step 5: Policy Issued

After the insurer approves your application, your policy will be issued under the MWPA provision. Now, your wife and children are legally protected by the policy.

A life insurance policy secured by the Married Women’s Property Act, 1874 can be purchased by any married man or woman in India including widower and/or divorcee. Some common types of applicants who should consider purchasing MWPA life policies in India include:

• Salaried Individuals who may or may not have outstanding debts like home loan or personal loan
• Individuals who are part of HUF (Hindu Undivided Family) or joint family
• Business owners with outstanding debts
• Individuals who have irregular or erratic income

For all the above types of applicants, the goal is to ensure the financial protection of their dependent spouse and/or dependent children if the unforeseen happens.

Illustration

Case 1: Mr. Kishore, a businessman, took out business loans to scale the business. Additionally, he bought a ₹1 crore term insurance policy under the MWP Act, claiming his wife and children as the beneficiaries. One day, Mr. Kishore suffered a major accident and lost his life. As a result, the creditors attempted to claim his term insurance policy to settle his debts, but due to the MWP protection, their claim was dismissed. Mr. Kishore’s wife and children got the benefits of the term insurance.

Case 2: Mr. Singh was a part of a Hindu undivided family. He had purchased a term insurance policy under the MWPA to financially protect his wife and children. After his sudden demise, his family members started to claim the benefits of his term insurance, leading to a family conflict between his family and his wife. Finally, the court ruled in favour of his wife and children because the policy was secured under the MWP Act, making them the undisputed beneficiaries of the term plan.

In both cases, MWPA acted as a significant relief to the wife and children, without which they would not have been able to claim the benefits of the term insurance policy, which was conflicted by the creditors in case 1 and the extended family members in case 2. Hence, MWPA acts as a safety net for the wife and children in case of any dispute arising after the husband’s death.

The MWP Act also specifies individuals who are allowed to be beneficiaries of an eligible life insurance policy. Potential beneficiaries of these policies include:

• The wife of the policyholder as sole beneficiary
• The wife and children of policyholders as joint beneficiaries
• Natural born or adopted child/children of the policyholder

As you can see, MWPA does not allow even other close family members like parents and siblings of the policyholder to become beneficiaries of life insurance policies. What's more the policyholder himself cannot be the beneficiary in this type of insurance policy.

The MWP Act in term insurance is an innovative step to financially protect the wife and children. However, the policy has certain limitations and challenges, which are explained as follows:

• Availing Loan Facility

  Many policies can be used to avail a loan, but a term insurance policy under the MWPA cannot be used to avail the loan benefits.

• Beneficiaries Cannot be Changed

  If you buy a term insurance policy under the MWP Act, then you cannot change the name of the beneficiary later under any circumstances. Even if you are going through a divorce, it won't be possible to change the nominee if you have signed the MWP addendum.

• Limited Coverage

  Most people don’t have term insurance under the MWPA, as it cannot be added to the policy later. You must select it while purchasing the plan. There is no provision to include it after you have purchased a term plan.

• Can Only Be Taken by Married Individuals

  A term insurance policy under MWPA can be purchased only by a married person, not otherwise, limiting the scope of MWPA.

The MWPA term plans differ from standard term insurance plans in the following manner:

The key goal of the MWP Act in life insurance plans is focused on minimizing the financial hardship of family members like dependent wife and children in the case of the unexpected demise of the family’s earning member. But the actual scope of the act is much wider and helps legally enforce many other financial rights of women in India.