A life insurance policy is intended to protect the policyholder’s dependents in the event of his death. The payout is meant to replace lost income and help the family meet its financial needs. Having bought adequate life cover, it is natural for a policyholder to wonder whether his family’s financial future will be secure even in his absence. What if a policyholder also has outstanding liabilities like a personal loan? Creditors may seek to recover their dues from his assets, including life insurance policy proceeds, potentially risking the family’s financial security.




The law provides a pathway to safeguard the interests of the policyholder’s immediate family in such circumstances: Married Women’s Property (MWP) Act, 1874. By bringing your life cover under the purview of this Act, you can ensure that the claim proceeds go only to your wife and children.



Life insurance and MWP Act

The objective: Protect life insurance proceeds against creditor claims after the insured’s death.



Applicability: Only wives and kids can be beneficiaries; the latter even in case of divorce/wife’s death.



Mode of purchase: Invoke the MWP Act while buying life insurance.



The cost: Nil. Simply tick the relevant box/ le addendum.



Get the timing right: Only at policy inception, not retrospectively.



Why MWP matters


When an individual dies or faces insolvency, his assets are sold to settle his liabilities. His family can then claim the remaining assets held in his estate.




However, if your policy falls under the purview of the MWP Act, the proceeds cannot be used to clear your debts. It becomes a part of a trust, where only the wife and children are the beneficiaries. It also serves as a financial shield if they are involved in a joint family business, particularly in case the life assured fears that in his absence, his wife and kids may be denied their rightful share in a future inheritance dispute.



Act at policy inception, not later


To avail of this benefit, however, you need to be vigilant at the time of buying the life insurance policy. You have to fill the MWP addendum form at policy inception. You will not be allowed to do so at a later stage. While some life insurers may require you to fill out a separate form, other proposal forms simply require you to tick the relevant boxes.




Despite the simple mode of invoking the Act and ringfencing the life policy against claims by creditors and family members, including in-laws, awareness around this provision remains limited.



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Not only ‘married’ men


While the Act is primarily aimed at married men intending to protect the financial interests of their wives and children, it takes into account situations such as divorce or the wife’s death. That is, widows or divorced men can also invoke the Act at the time of buying life policies to protect their children.