You buy term insurance to ensure the financial security of your spouse and children in your sudden absence. Unfortunately, only purchasing a term plan does not guarantee that your family members will receive the policy benefits in case of an unfortunate event.
If you have any outstanding liabilities, your nominees may not receive any of the policy benefits, as the money will be used to repay these debts.
One way to prevent this is by purchasing the term insurance plan under the Married Women’s Property (MWP) Act, 1874. When you avail of the policy under this Act, the courts cannot attach the term insurance benefits for the repayment of your outstanding obligations. So, your wife and children will receive the entire death benefit.
What does term insurance mean?
Before understanding how the MWP Act works, it will be beneficial to understand what is term insurance. It is a pure life cover that provides the benefits to your nominee if anything untoward happens to you during the policy’s duration. Your nominees can receive the benefits as a lump sum, which they can utilize for any purpose. Alternatively, you may combine a partial lump-sum payout and a regular installment payout of the benefits for your nominees.
How do you invest in a term insurance policy under the MWP Act?
You can buy term insurance online via the insurer’s website. When you fill the application form for the policy, you will have to choose the option that asks if you want to buy it under the MWP Act. Once you select this choice, you need to provide information about the beneficiaries and trustees (if applicable). Some of the details required include the names of the beneficiaries, their relationship with you, date of birth, and the percentage share of the policy benefits. Although you can add multiple beneficiaries, they can only be your wife and children.
Benefits of buying term insurance under the MWP Act
Any term plan purchased under this Act is considered to be a trust. Only the trustees have control along with its servicing and receiving the policy benefits in your absence. If an unfavorable event results in your untimely absence, the claim will be settled only in favor of the trust, and the trustees will receive the money. Your creditors or relatives cannot claim the term insurance benefits, and these are not a part of your estate. The trust holds the policy benefits financially, thereby securing your wife and children when you are not with them.
If you have an outstanding home loan or car loan, the lenders can claim the insurance proceeds. However, when you purchase the term plan under the MWP Act, only the beneficiaries have the right to get the policy benefits.
If you live in a joint family, there may be a few complications on the ownership, as some finer points may not be specified clearly, resulting in possible conflicts and disputes. However, when you buy the term plan under the MWP Act, there is complete clarity on who will receive the policy benefits in your absence.
Buying a term plan under the MWP Act is advisable if you have any pending loans. It is also an excellent way to protect your family from creditors or fraudulent relatives. However, remember that you cannot change the beneficiaries after the issuance of the policy. Therefore, if you get divorced, the insurer will still pay the policy benefits to your ex-wife and children, as mentioned at the time of purchase. Whether you buy term insurance online or offline, make it clear that you are investing in it under the MWP Act. This is because you are not allowed to make any changes once the insurer issues the policy.