Purchasing a term plan for wife and children under the Married Women’s Property Act 1874 (MWPA) is significant for a person as the amount of the claim will go directly to the beneficiaries and no creditor can claim the proceeds of his death.
“Purchasing a term plan under the MWP is important because the proceeds of the policy will only go to the beneficiaries and no one else. This will ensure that after the death of an individual, the proceeds of the policy will only go to the wife or children or both (depending on the option and percentage selected at the time of policy issuance),” said Jitin Parekh, Company Secretary and Chief Legal & Compliance Officer, Aegon Life Insurance.
“It’s a good thing to create an independent estate for the wife and/or children, free from any claim by creditors and from any legal seizure. It is particularly recommended for businessmen and professionals,” adds Karthik Raman, Chief Marketing Officer and Head of Products at Ageas Federal Life Insurance.
Here are some things you need to know about buying a plan under MWP:
What must a person do to purchase a term plan under MWP?
The term plan under MWP can be purchased by a man (married/divorced/widowed) for the benefit of his wife or children or his wife and children or any of them. It can also be purchased by a married woman to provide financial security for her child(ren).
“The option to avail the term plan under the MWP Act must be selected at the time of policy purchase. This option cannot be exercised after policy purchase,” says Parekh.
Raman adds that the insurer may require him to complete and sign an additional document to that effect, in order to meet MWPA requirements.
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Is it different from other term plans?
According to Raman, in terms of features, it is no different from any other non-MWPA plan. “The main advantage of purchasing a term plan under the MWPA is that the sum insured under the plan cannot be subject to judicial seizure or claims from creditors. In other words, it creates a separate estate in the name of the insured’s wife and/or children,” he says.
Parekh adds that the policy under MWP is different in that beneficiaries are defined at the time of issuance. Also, money under the policy cannot be applied to any liability of the insured after death. The proceeds of the policy must go to the beneficiaries.
“In summary, the law protects a woman’s right to the proceeds of police money against any other heirs, creditors and relatives,” Parekh says.
Is this option available in all temporary plans?
According to experts, this option is usually available in all term plans. But the option may not be available for loan covers because the creditor or bank would want unlimited access to the policy money as collateral.
Are there any additional fees for purchasing a term plan under MWP?
There is no additional cost for the MWPA feature.
What are the popular term plans available under MWP
Raman says that one can benefit from most plans, term as well as savings plans, under the MWPA, but as mentioned earlier, there might be some restrictions on credit-related plans (this is i.e. loan hedges).
What are the key points to know when buying a policy under MWP?
- Tell your insurer that you want to choose a temporary plan under MWP. You will not be able to change/modify the policy after it is issued.
- The proceeds can only be paid to the beneficiaries of the policy and therefore one should not plan to pay off the debt with the money of the policy.
- It is the best option to protect the financial needs of the family after the death of the insured since the money cannot be assigned to any other use.
- Beneficiaries cannot be changed later
“It is important to bear in mind that although the policyholder would benefit from the plan under the MWPA, due to legal restrictions they would not be able to control the policy in the future as it would be assigned to the estate of his wife. and/or children. The client would also need to complete additional paperwork naming trustees who would administer the policy as well as naming his wife and/or children as beneficiaries,” Raman explains.