Taking Cover. This cover puts wife, children first

You are an entrepreneur, with great ideas. You have steadily built your business. Like most businesses in India, you have had to borrow to make your dreams come true. But you are not worried about your debts, because your business is doing well.

You are happily married, and you have two young children. As a businessman, you understand life is uncertain. So, you buy a large insurance policy to protect your wife and children. You believe that if something happens to you, the insurance money will provide financial security to your loved ones, right? That’s where you would be wrong.

Unfortunately, your family does not have the first right on the claim proceeds received from the insurance policy. Instead, your creditors — people and companies you have borrowed from — get this right. So, if your assets are not enough to cover your debts, your insurance proceeds (forming part of personal assets) can be tagged to pay them off, and your wife and children will be left without financial security, defeating the purpose of insurance.

You don’t want that to happen, do you?

Then, it’s time to get familiar with the Married Women’s Property Act (MWPA), 1874.

How does MWPA protect your family?

The MWPA applies to a married woman’s right to her husband’s property after his death. But in this article, we will look at how it applies specifically to insurance policies.

Section 6 of the Married Women’s Property Act prevents creditors from attaching a husband’s insurance policy in which the wife and/or children are beneficiaries. A MWPA-linked insurance policy automatically holds the policy in trust for the beneficiaries, and nobody else has a right on this claim.

Not just creditors, even in-laws and relatives have no claim to the proceeds from a MWPA-linked policy. That’s why a MWPA policy can be a boon in joint families, where many people may have a stake on the claim on an individual’s policy.

In a normal policy, an individual ‘nominates’ his wife as a beneficiary, and can later change the nomination if he gets divorced. But, in a MWPA-linked policy, the wife and children are ‘endorsed’ as beneficiaries, and that can never be changed. So, if your husband is buying a term insurance plan, make sure he gets it endorsed under MWPA.

MWPA applies to all married women across India, except Jammu & Kashmir.

How to get MWPA protection?

To give MWPA protection to your family, just fill out the MWPA form while buying an insurance policy. You can apply MWPA only to new policies, and cannot convert existing policies to be covered under the Act. You can name only your wife and children as beneficiaries in a MWPA policy. Some other points to note: In a normal insurance policy, the maturity proceeds go to the policyholder (husband), if he survives the policy term. In a MWPA-linked policy, the benefits go directly to the wife and children.

The writer is CEO, Karvy Private Wealth

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