Forbes India 15th Anniversary Special

After death: Don't let creditors usurp the money you left for your wife

Published: May 30, 2018 05:16:53 AM IST
Updated: May 30, 2018 09:14:12 AM IST

After death: Don't let creditors usurp the money you left for your wife

Such a situation would be nightmarish for the loved ones of a deceased policyholder. Not only would they have to go through the trauma of losing someone, but would also lose out on the money which was meant for them. There is, however, a way to ensure that this doesn’t happen.

Policies under Married Womens Property Act
Purchasing insurance, be it a car insurance policy for your car or a health insurance policy for yourself are investments which are designed to provide returns during testing times. With regards to life insurance most of us have extremely high expectations which we hope will be met even in our absence.

If you are planning to buy a life insurance policy under which your wife is the main beneficiary,find variety of life insurance here . you can ensure that no one else can stake claim on her right after your death. This can be done by utilising the provisions under the Married Women’s Property (M.W.P) Act, which assures protection to the wife/children of the policyholder.

As per Section 6 of the Act, a life insurance policy purchased under the provisions of the Act cannot be attached to repay the debt owed by the policyholder/insured.

What is the MWP Act?
It has been observed that the property of legal heirs of an individual (more so if the heir is a women) could be attached to recoup money owed by the deceased borrower. This posed a threat to the survival of the dependants, especially the wife of the deceased. As such, the MWP Act was introduced to safeguard the interests of the wife of an individual. Under the act, any property which is owned by a married woman cannot be used to repay the debt owed by the husband. It was also meant to safeguard the wife from relatives of the deceased husband, creditors, etc.

How can you utilise the MWP Act?
The MWP Act can be a blessing to married women across the country. Any married man can utilise the provisions of the Act to guarantee financial security for his wife. Given the fact that most of us have debt, it is a smart idea to protect the nominee from lenders. From personal loans to home loans to credit card bills, we have a number of financial obligations. These obligations do not vanish even after our death, for the onus of repaying them falls onto our family members.

If you are a married man looking to purchase a life insurance policy, you need to check whether the policy is offered under the MWP Act. If yes, you need to select the option for the same, stating that you wish to buy the policy under the Act.

The other procedures remain the same. You will have to choose the policy tenure, sum assured, etc. Ensure that you can afford the premium amount by utilising the life insurance premium calculator.

The most important aspect to remember while purchasing a policy under this act is that you cannot change the beneficiary. The only permitted beneficiaries under the act are your wife or/and your children(s).

The beneficiary once chosen cannot be changed. This essentially means that even if you get a divorce in the future your ex-wife will continue to be the beneficiary under the policy. It is possible, however, to select more than one beneficiary while initially purchasing the plan.

Once purchased, the policy benefit will be treated as a trust, with only trustees having any right on it. The trustees in this case will be the beneficiaries.

We can understand how this works through a simple example. Raj, a married businessman buys two insurance policies, a term plan and a ULIP. The sum assured in case of both plans is Rs.50 lakh and in both the cases he chooses his wife as the nominee, but selects the term plan under the MWP Act. He pays a premium for both and ensures they do not lapse.

Given the nature of his business Raj also has debt to the tune of Rs.1 crore. He passes away while both the plans are active. In this case, the creditors cannot claim any amount his wife received from the term plan, which means that she will be assured of Rs.50 lakh. The banks, however, can approach the courts to recover their dues from the payout made from the ULIP.

We all wish to do a lot for our loved ones. Most of us spend our lives in a bid to provide for them. Right from securing their financial health through a good health insurance policy to providing them with the best facilities to grow and develop, we have their best in our mind. We do not even bother about the money we spend towards maintaining our insurance policies, be it a motor insurance policy, a life insurance policy, or a health insurance policy. We overlook the costs because we know the returns justify the amount we pay. While we may be able to do justice to the needs of our family members while we are alive, we can also ensure that they are not left in the lurch after our death by choosing a policy under the MWP Act.