An Overview
Insurance Samadhan receives numerous complaints where policies have been stamped with MWPA, and policy owners are struggling to receive the maturity proceeds. The MWP Act offers several benefits and can be used for estate planning after the death of the insured party.
Key Provisions & Implications of MWP Act Sections 5 and 6
MWP Act Section 5 declares that any married woman may take out a policy of insurance on her own life or on her husband’s life on her behalf, with the amount designated as her separate property. As per the law at that time, if a wife took out such a policy using assets other than her separate estate and died during her husband’s lifetime, the husband became the owner of the policy in the capacity of her administrator. However, the husband cannot be considered a beneficiary because all proceeds remain in trust for the benefit of the children.
MWP Act Section 6 provides that an insurance policy taken out by her husband on his life and expressed to be for the benefit of the wife or children or both shall be deemed to be a trust for the benefit of the wife and the children. Such policies are not subject to the claims of the husband’s creditors, except in cases where the transaction was intended to defraud the creditors. Without this section, such an arrangement made by the husband would be allowed under the law.
We have attempted to explain the implications of MWPA as detailed below:
- MWPA is a legal system where property can be created for the exclusive benefit of the wife and children.
- This applies to Hindus, including all religions associated with Hindus such as Jainism and Sikhism, among others.
- Insurance is also considered property and ensures that the life insured provides maturity or death proceeds to the immediate family, namely the wife and children. Compliance with MWPA is mandatory, and the life insured cannot claim any money.
- The objective of insurance mentions that it is purchased under MWPA. It must be acquired as a new policy, as old policies cannot be covered under MWPA.
- Any policy can be purchased under MWPA.
Final Thoughts
Ideally, it suits businessmen who have significant liabilities and potential disputes. This means that they fear that their properties and wealth may be attached by the state in the event of their death because they will not be present to contest it. In such cases, policies under MWPA can be a real boon. However, MWPA policies are not recommended for regular salaried individuals or businessmen with zero liabilities or disputes. Customers should be aware that they forfeit some of their rights under MWPA.
By – Shailesh Kumar
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