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The Impact of The Married Women's Property Act on Term Insurance

TeamAckoMay 13, 2024

Term insurance is an essential tool for protecting your family's financial future. It's designed to provide a lump-sum payment to your beneficiaries if you pass away during the policy term. Before 1874, married women in India could not own property or have inheritance rights. However, the Married Women's Property Act of 1882 has significantly impacted how term insurance policies are structured and how they can be used. This article will explore the Married Women's Property Act, how it affects term insurance policies, and why it's important to understand this law.

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What is the Married Women's Property Act (MWPA)? 

In 1874, the British Raj enacted the Indian Married Women's Property Act to safeguard married women's interests. It offered women access to their own property and any inherited property. The Married Women's Property Act was amended in 1923 to include Term Life Insurance. Moreover, the married woman could also choose what she wanted to do with the property. Whether she wanted to hold on to the property and assets, sell it, or bequeath it to others, the choice was hers alone.  

One of the biggest disruptors in British India that still finds a place today, the Indian Married Women's Property Act forced citizens to unlearn and relearn their attitudes and policies towards women. The Act heralded a new era in women's independence and helped them receive, or stake a claim, in their rightful belongings, assets, money, and property. 

What is the Married Women’s Property Act in Insurance?

Buying a Life Insurance Policy is straightforward, but the process of ensuring the death benefits or savings go to their beneficiaries may not be so straightforward. The money they've worked so hard to save should end up with their loved ones instead of being claimed by creditors, repo agents, or loan sharks. The policyholder's money or property can be claimed after death if they have left an outstanding loan or owe money to others. 

The original Married Women's Property of 1874 was updated in 1923 to extend to Term Life Insurance policies that went to a married woman and/or her children. 

The 1923 Married Women's Property Act safeguards the woman's property and assets, including Term Life Insurance, from relatives and her husband. According to the Married Women's Property Act, when a married man buys a Term Life Insurance plan under the Act, only the wife and children named in the policy will receive the amount, and no one else. Even the policyholder cannot claim any amount! 

How Does the Married Women’s Property Act Term Insurance Work?

A term life insurance under the MWP Act functions as a trust. The benefit amount and the servicing of the policy are controlled solely by the trustees. Creditors are also exempt from any claim. It means the policyholder, i.e., the husband, cannot make claims against it. The trust will hold and protect the claim proceeds for the designated beneficiaries (usually the wife and/or children),  ensuring their financial protection. 

A term plan under the MWP Act is also an excellent choice in joint family arrangements where disputes regarding money and property can arise. This specialised plan eliminates any discrepancy by providing a clear title to the policy beneficiary. The beneficiaries of such a term plan remain unchanged during the entire policy term. 

Types of Beneficiaries for Term Insurance under the Married Women’s Property Act

  • Security for Wife

  • Security For Children/Child

  • Security for Both Wife and Children

Security for Wife

You can choose to nominate your wife if you don't have children solely or if they are grown and financially secure. In the event of your untimely death, she will get the full death benefit from your term insurance plan. In this manner, she will be able to support herself independently of loans or any other source of income.

Security For Children/Child

If you want only your children or child to benefit from the policy, you can choose them as the beneficiaries, and they will receive the benefits. They will have to divide the proceeds among more than one child. The policy benefits will help manage their daily costs, career-based needs, and educational goals can be met.

Security for Both Wife and Children

You may also choose to share the benefits of the coverage between your wife and children. Furthermore, the entire coverage may be split into percentages based on their future requirements. If the children are small, you can give your wife a bigger portion so she can take care of both the household bills and their schooling.

Benefits of Buying Term Life Insurance Under The Married Women's Property Act

Buying a Term Life Insurance Policy under the Married Women's Property Act ensures that the policyholder's wife and children are the sole beneficiaries of the death benefit. Here are other benefits.

  • When the policyholder purchases a term life insurance policy under the Married Women's Property Act, he buys it only for his wife and children. The beneficiaries should be identified and stated in the insurance policy when the policyholder first purchases it.  

  • Purchasing a Life Insurance Policy with the Married Women's Property Act is applicable to all religions. 

  • The person who buys the policy can split the amount according to his wife and children's requirements. However, these amounts must be specifically mentioned in the policy and cannot be amended. 

  • The policyholder doesn't have to create a separate trust for the beneficiaries. This trust belongs solely to the wife and children of the policyholder. 

  • When a woman or a man buys a Term Life Insurance Policy under the Married Women's Property Act, family members or creditors cannot claim the death benefit because it is protected under the act and reserved for wives and children only. 

Impact of divorce on a Term Plan bought under The Married Women's Property Act

The last thing on a divorced person's mind would be considering their Term Life Insurance! However, identifying and securing their insurance, payout, if any, and clearing any dues or settlements should be a priority when they're no longer married to the person they took out a term life insurance policy with. 

  • When a couple gets mutually divorced, their alimony or maintenance, property, and alimony issues are settled according to court decrees. 

  • After a couple of divorces, the husband can remove his wife from the list of beneficiaries of a regular Term Life Insurance policy. However, one of the primary benefits of purchasing a Term Life Insurance Policy with the Married Women's Property Act is that even after divorce, the wife is still entitled to the coverage amounts.

As stated above, once the Married Women's Property Act has been invoked in a Term Life Insurance Policy, it cannot be amended or changed, securing the woman's finances under any circumstance.

How to Buy a Term Insurance Plan Under the Married Women’s Property Act

Buying term insurance under the MWP Act is quite simple and synonymous with buying a standard life insurance policy. The significant steps of this plan are:

  • First, you must buy a term insurance plan from your chosen provider.

  • Next, you have to fill out the insurance form accurately.

  • Find the section that asks if you are buying the term plan under the MWP Act and select ‘Yes.’

  • Provide nominee details, including name, relationship, and the coverage amount. 

Factors Affecting Married Women's Property Act Term Insurance Premium

The few fundamental factors that affect a term plan under the MWP Act are:

  • Number of Beneficiaries: The premium amount depends on the total number of beneficiaries and how the coverage is split between them if there is more than one beneficiary. 

  • Age: As in any standard term plan, the policyholder's age also plays a part in determining the insurance premium.

  • Health and Lifestyle: The policyholder's medical condition and lifestyle are also determining factors. Usually, individuals engaged in risky activities may receive lower coverage or need to pay higher premiums.  

These factors are commonly considered in underwriting to assess the risk associated with insuring an individual and determining the appropriate premium to charge.

What Other Laws Did the MWP Act Enact?

There are several other laws enacted by the Married Women's Property Act (MWP Act):

  • Right to Opt for Insurance

With the amended MWP Act of 1923, a married woman can buy and possess an independent term life insurance policy and claim its benefits. Before the act, married women were barred from holding such independent contracts. 

  • Insurance for Married Women

Previously, when a married man with outstanding loans and debts died without clearing the same, the creditors could claim the property and assets, including the term plan benefits. However, based on section 6 of the MWP Act, the death benefits of the term plan can only be received by his wife and/or children. 

Other laws include Ownership over Earnings, Husband’s Liability for Breach of Trust, Initiate Legal Proceedings, Liability for Post-Nuptial Debts and Husband’s Liability for Ante-Nuptial Debts. 

Wrapping it up

In conclusion, the Married Women's Property Act (MWPA) allows married women to have separate property rights and protects their assets from being claimed by their husbands or creditors. A Term Life Insurance Policy under the Married Women's Property Act also offers the wife coverage rights in the event of a divorce. A policy converted to the Married Women's Property Act cannot be modified or changed afterwards, protecting the woman's assets in all situations. This ensures optimal peace of mind, knowing that the sum insured will be received by the one it is insured for.

Frequently asked questions

Here are some common questions about the Impact of The Married Women's Property Act on Term Insurance

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Is the husband entitled to benefits from Term Life Insurance with Married Women's Property Act? 

No, the husband is not entitled to benefits from Term Life Insurance purchased under the Married Women's Property Act. 

Can a divorced woman claim Term Insurance benefit under the Married Women's Property Act? 

Yes, a divorced woman is still entitled to Term Insurance coverage. The Married Women's Property Act establishes that when the policyholder buys the policy, his wife and children will get the amount, regardless of a change in circumstances - such as divorce. 

If a married man bought a term policy with MWPA and has outstanding loans after he dies, can creditors claim the amount? 

No, creditors cannot claim the amount listed in the term life insurance policy taken under the Married Women's Property Act. Usually, creditors can claim Life Insurance death payouts, but Life Insurance taken with the Married Women's Property Act protects against this from happening. 

Why is Section 6 of the Married Women's Property Act 1923 important? 

Section 6 of the 1923 Married Women's Property Act states that when a married man purchases a Term Life Insurance policy, his wife and children are wholly entitled to it. He cannot claim it at all, and nor can creditors, or relatives.

Who can opt for Term Life Insurance under the Married Women's Property Act? 

A married man, whether he is a widower or a divorcee, or a married woman can purchase a Term Life Insurance Policy under the Married Women's Property Act. 

The following individuals may purchase a Term Life Insurance Policy under the Married Women's Property Act to safeguard against the policyholder's money or property being reclaimed:

  • Business owners with accumulated debt

  • Employed individuals with outstanding loans

  • Individuals in a joint family system and/or Hindu Undivided Family (HUF) 

  • Policyholders with irregular sources of income

Who can you name as beneficiaries in Term Life Insurance under the Married Women's Property Act of 1874?

You can name the following individuals as your beneficiaries in Term Life Insurance under the Married Women's Property Act.

  • Wife

  • Children (biological or adopted)

The husband cannot be a beneficiary of the Term Life Insurance policy.

Can I surrender a Married Women’s Act Term Insurance Plan?

Yes, you can surrender your term insurance policy under the purview of the Married Women's Property Act if necessary. On the other hand, the beneficiaries must sign the policy and be made aware of the procedure. Upon surrendering the policy, you will receive the benefits and might use them to help your dependents.

What happens if the wife passes away before a Married Women’s Act Term Insurance Plan tenure ends?

In such a situation, the legal heir will receive the benefits of the policy.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet, and is subject to changes. 

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