Insurance plan under Married Women’s Property Act is considered as a separate trust automatically (there is no need to create a trust). At the time of the proposal, you have to mention the names of the beneficiaries. You may also mention the names of trustees (not mandatory though).
But, if the beneficiary is a minor then the appointment of the Trustee is compulsory.
Trustee cannot be a minor / HUF (Hindu Undivided Family).
Also,the proposer can neither be the beneficiary nor the Trustee.
The Beneficiary and the Trustee can be the same person (e.g. Your wife can be both the beneficiary and the Trustee).
The trustees can be the wife and/or one or more of his adult children, or a third person.
You (the policyholder) have the option to change the trustees at any point in time. However, the beneficiaries of the plan once declared cannot be changed.
In case of a death claim, the insurance policy proceeds are given to the trust and cannot be claimed by the creditors.
Can assign or take a Loan on policies which are under Married Women’s Property Act ?
No, cannot assign the policy to another person (or) take a loan on the policies which are covered under Married Women’s Property Act – MWP Act
. (However, if loan request comes from you, signed by the beneficiary & Trustee then it can be processed)
Can surrender the policies which are under Married Women’s Property Act ?
Surrender request should come from policyholder and signed by the Trustee (if appointed) and beneficiary. The beneficiary should be major at the time of request. Surrender proceeds will be paid to the Trustee/Beneficiary. The policy maturity benefits will also go to the Trust.
Due to lack of awareness, very few policies are being taken under Married Women’s Property Act . Life insurance is a tool to protect the dependent family members. If this purpose is to be achieved in its fullness, then having the life insurance plan covered under MWP Act is the easiest and the best way.
We buy Life insurance cover to protect ourselves and our family members in case of any unfortunate event. We are also aware that an individual needs to buy adequate Term Plan if his family members are dependent on him / her.
An Example – Mr. Amar is a businessman and borrows some capital to expand his business. He has taken a Term Insurance Policy with his spouse as beneficiary (nominee). After his sudden demise, his creditors approached the court and asserted their right to get paid out of the proceeds of the Term Insurance policy.
In this example, though Mr. Amar has taken a term insurance policy, his family has not benefited from it. The claim proceeds (death benefits) are given to his creditors.
In today’s world, ‘buying on credit’ has become a common thing. Whether employed or self-employed, most of us buy on credit (home loan, personal loan, consumer loan etc.,). In this kind of scenario, how to make sure that only your dependents receive the insurance policy claim proceeds.
Due to lack of awareness, people are not making use of the Married Women’s Property Act . For Big Life Insurance policies MWP Act is a blessing. but many people, even in the insurance industry, are not aware of the provisions of the MWP Act. Under Married Women’s Property Act , the proposers lose control to change or make alterations in the plan.