Life insurance is a tool to protect members of the family who are dependent on the family's one or more income-generators. If this purpose is to be achieved completely then having a life insurance plan covered under the Married Women's Property Act (MWPA), 1874 is the easiest way.
At the time of submission of the proposal, a separate form or statement needs to be filled by the policyholder or proposer for it to be covered under MWP Act. The form asks for details of the beneficiaries, the share of the benefits and the trustee.
MWPA serves the following purposes:
(i)Â It is to ensure that the property of the married women is safeguarded.
(ii) Earnings of married woman shall be considered to be her separate property.
(iii) Married women are absolute owners of the property vested in, or acquired by them.
(iv) Their husbands, by marriage, do not acquire any interest in such property.
The benefits of the policy proceeds can be mentioned as specific percentage to each beneficiary or as equal amounts.  Â
The beneficiaries of the plan once declared cannot be changed at any time by the proposer. Each policy is considered as a separate trust. At the time of the proposal, the proposer is expected to mention the trustees. In case of a death claim, the policy proceeds are received by the trust and cannot be claimed by the creditors nor will it form part of the estate of the proposer.
The trustees can be the wife and/or one or more of his adult children or a third person (individual, bank, or organisation).
INSURANCE BY HUSBAND FOR BENEFIT OF WIFE UNDER SECTION 6 OF MWPA: Insurance taken by the husband on his life for the benefit of his wife and/or children creates a trust for the beneficiary. Once the policy matures, the proceeds are to be paid to the trustees who, in turn, will pay to the beneficiaries. Husband will not have any interest in the policy even if he is alive on the date of maturity. Creditors of husband cannot have any interest in the policy.
However, if the policy is taken under the MWPA with an intention to defraud the creditor, then the provision of the Act will not apply to such a policy. In such a case, the right of the creditor to be paid out of the proceeds of such a policy is not destroyed.
The policy will not form part of a husband's asset. The husband can acquire rights on the policy only if all the beneficiaries surrender their right before the policy matures. The husband does not have any right to surrender the policy. Only the beneficiaries have a right to surrender the policy. But in case of death of the beneficiaries, the trust is automatically dissolved and the interest in property vests back to the husband.
Why are not people making wide use of the MWPA? Because, there is lack of awareness and most men prefer to have complete control on their life insurance plans. Once covered under MWPA, the proposer loses control to change or make alterations in the plan.
The writer is a Deputy Managing Director of Pragati Life Insurance Ltd.
shekhar_2209@yahoo.com
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