Insurance Shenanigans: Why Nominating Your Wife Might Not Be Enough (and How to Fix It!)

17 April, 2024

            Insurance Shenanigans: Why Nominating Your Wife Might Not Be Enough (and How to Fix It!)

Life Insurance is the MVP under the MWP Act 1984

Because I could not stop for Death –
He kindly stopped for me –
The Carriage held but just Ourselves –
And Immortality

Emily Dickinson's description of death is nothing but gentle, but in reality only if death could be so kind. There is no hiding from death. There is no hiding from uncertainty. But, the truth remains losing our loved ones does break us into shackles. And in your wildest imagination, if it happens to be the bread earner of the family, it is despairing. Especially, if there is a lot of debt involved.

In case of an unfortunate demise of the main earning member or business owner, most of the assets (excluding a few financial assets such as EPF, PPF, and NPS) including even life insurance policies can be attached to recover this debt & income tax liability. Hence, it is very important to protect the basic needs of the spouse and family members and protect against such attachments.

If you are a married woman, then insurance under Married Women's Property Act is sacrosanct. It is a legal guardian that ensures the insurance money goes straight to your wife and/or kids, no detours!

What makes Insurance under the Married Women’s Property Act so special?

MWP act focuses on empowering married women and protecting the properties of women from creditors, and relatives after marriage. MWP act applies to all women of all religions. Section 6 of the MWP Act covers life insurance plans. Once a policy is taken under the MWP act, it may not be attached by courts for repayment of debts of the policyholder. Only wife and children are entitled to take benefit of this act.

Hence, the MWP Act entails that if a married man buys a 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. cp In simple words, policies under the MWP Act cannot be assigned to anyone to take a loan. Even if the policyholder tries to surrender the policy or at policy maturity, the proceeds will go to the beneficiaries only. If the policyholder intends to protect his wife and children from creditors, then it definitely makes sense to enroll the insurance under this act.

Remember: The MWP Act applies when you first buy the policy. You can't add it later. So, get it right from the start!

Circumstances where MWP is saviour for your wife and children

1. Creditors/ Family Dispute The MWP Act protects the payout from anyone except your named beneficiaries. The money becomes a separate trust, protected from creditors and even other family members. Think of it like a financial fortress for your loved ones.

2. Family Planning The MWP Act is a rock-solid foundation for your family's financial future. It's a clear message - this money is for your wife and children, period. No confusion, no drama, just peace of mind.

Who can buy insurance from this

Any married man or widower/divorcee looking to secure his family's future. It's especially helpful for:

a) Businessmen and salaried folks with loans: Life happens, and the MWP Act ensures your loved ones aren't left scrambling to pay off debts.

b) Joint families: Keeps things fair and avoids any squabbling over the money after you're gone.

Due to unawareness among people, very few policies are being taken under the MWP act. The MWP Act is a game-changer for married folks looking to safeguard their family's future. Don't let life insurance shenanigans leave your loved ones vulnerable. Get covered and get covered right?

Drawbacks under MWP

Certain aspects of the act are disadvantages for the policyholder. As a policyholder, you need to be cautious while taking the policy as it could be burdensome in some situations. Let's ponder on some of the limitations.

  1. If matters come to divorce, your wife is still entitled to the payout as the MWP Act cuts through potential divorce disputes with a laser sword of clarity.
  2. Even though the ‘policyholder’ survives during the maturity of the policy or even during surrender, ‘the policy holder’ won’t have any right to survival benefits.
  3. Only new policies can be bought under the MWP Act and existing active policies cannot be assigned under the MWP Act and this is a major drawback.

Hence, we should be clear about the objective before buying new insurance plans. If the clear intention is to protect the needs of beloved family members, then we can go ahead and buy the policy under the MWP Act. However, if we intend to buy the policy to get the maturity benefits towards certain goals (Endowment or ULIP Plans), we should think twice about opting under MWP Act.

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