What is the MWP Act in Term Insurance?

When you buy a term insurance policy, you expect the death benefit to go straight to your loved ones. But without the right legal protection, the payout might be exposed to creditors or family disputes. That’s where the Married Women’s Property Act, 1874 (MWP Act) comes in. In this article, we’ll break down exactly what it is and whether you should opt for it.

What is the MWP Act in Term Insurance?

In term insurance, the MWP Act gives legal protection to the payout amount. This allows your spouse and/or children to receive the benefit without interference, even if there are loans, debts, or disputes.

Here’s how it works:

• Section 5 allows a married woman to buy a life insurance policy in her own name. This ensures that the policy benefits belong solely to her and her chosen nominees.
• Section 6 protects the proceeds of a life insurance policy taken by a husband for his wife and/or children.

Note: If a child is born after the policy is issued, they cannot be added as a nominee under MWPA.

How to Register a Term Policy Under MWPA?

Here’s a step-by-step guide:

1. Select the MWPA option when filling out your insurance application.
2. Complete the MWP Act addendum form (available from your insurer or their website). For example, here is HDFC Life’s Addendum Form. Please note that the form may differ for men and women.
3. Choose your beneficiaries, specify their details, and the percentage share of the sum assured.
4. Appoint a trustee to manage payouts to the beneficiaries. (This is optional but recommended.)
5. Submit it along with your policy application, as this must be done at the time of purchase, and you cannot add it later.

At Ditto, we have first-hand experience with term insurance and can help clarify eligibility for these plans. For other types of life insurance policies, it’s best to check directly with the insurer or your agent.

Who Can Be Appointed as Trustee?

• Family Members: Spouse, relatives, or close family friends.
• Professional Trustees: Financial advisors, lawyers, accountants, or other professionals with expertise in managing trusts.
• Corporate Trustees: Banks, trust companies, or similar institutions.
• Beneficiaries(Nominees) can also be appointed as trustees.

Common Challenges and Legal Considerations

Before opting for MWPA coverage, you should be aware of a few limitations:

• Beneficiaries Cannot Be Changed Later: Once a beneficiary is named under the MWP Act coverage, you cannot update or change the list during the policy term, even in the case of divorce.
• Parents and Siblings Cannot be Added as Nominees: You can only add your spouse and/or children.
• Policy Can’t Be Assigned or Used as Loan Collateral: You cannot leverage the policy to take loans or use it as collateral when it is registered under the MWP Act.
• Adds Permanent Legal Structure: The policy gets converted into a trust. While this provides strong protection, you lose control over it and can no longer change the details.

Who May Consider Purchasing a Policy Under MWPA?

• Salaried or self-employed individuals with unsecured loans, debts, or significant financial liabilities may consider an MWPA-covered policy to ensure the insurance payout is protected from creditors. 
• Individuals living in complex family setups, where there may be potential disputes over property or inheritance, may also benefit.

Why Choose Ditto for Term Insurance?

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Ditto’s Take

This lack of flexibility is exactly why we typically don’t recommend MWPA. Life situations can change, and having the option to update nominees is often essential. That said, if you’re confident in your beneficiaries and comfortable with these restrictions, an MWPA term plan can still be a suitable choice.