Your wife/children might not be the ultimate and sole beneficiary of life insurance policies since a nominee is considered a mere trustee and not the heir by law. Regardless of who the nominee is, there may be other legal heirs who need to be provided for as per the laws of succession. Also, the family of the deceased may be the last to receive the money, as creditors, if any, may seek a claim upon the Insurance monies to recover any debts which stand outstanding against the deceased.
Safeguard Your Policy With MWPA
In case of a dispute, or if the will is opposed to the nominee’s choice, or if there are other legal controversies, the payout may be put on hold or redirected. “If the policy is not safeguarded under a Married Women's Property Act, 1874 (MWPA) or separate trust, then it is likely that the life insurance proceeds may be subject to claims by legal heirs/creditors through the courts and be considered a part of the estate affairs of the deceased policyholder. So it is of utmost importance that your nominee is safeguarded against any such unforeseen eventualities,” says Manish Pahwa, Chief Compliance Officer, Future Generali India Life Insurance.
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A married man in India is permitted to insure his life for the benefit of his wife and/or children under Subsection 6 of the MWPA. This subsection automatically constitutes a trust, the proceeds of which shall remain exclusively the property of the specified beneficiaries. “Upon assigning the policy under MWPA, it becomes exempt from attachment by creditors, and it shall not be subject to modification, alteration in succession, or will,” says Pahwa.
This means that irrespective of whether the policyholder has outstanding debts or is embroiled in legal tangles at the time of his demise, his wife/children will unconditionally and seamlessly receive the benefit. It is an effective legal barrier against external claim losses, offering dependents financial dependability and security after the policyholder’s death.
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The Process Of Getting An MWPA Policy
“For buying an Insurance policy under the MWPA policyholder should fill Part E in the application process. The proposer may indicate life insurance MWPA selections, as a number of insurers incorporate it in the proposal form. Be sure to list the beneficiaries (spouse, children, or both) clearly,” says Pahwa.
Henceforth, the policy will be a constructive trust under Section 6 of MWPA. Make sure that the names and relationships to the beneficiaries are final, as this will be irrevocable. This option is only available to married men.
The policy becomes completely exempt from any claims or legal proceedings, and the benefit is payable immediately to the specified dependents. It is better suited for high-value policies such as term insurance.
