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.
Let’s consider a scenario – Mr. Agarwal 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. Agarwal 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.
Are you aware of the Married Women’s Property Act 1874 (MWP Act)?
MWP Act was created to protect the properties owned by women from relatives, creditors and even from their own husbands. The Act has been created to protect women’s rights, even after marriage. MWP act is applicable for all married women of all religions. ‘Section 6‘ of the MWP Act covers Life Insurance plans.
If you take an insurance policy under MWP Act, your life insurance policy is treated as a TRUST and you can be assured that the policy money will be given to your nominee(s) only. The claim proceeds are free from creditors, court and tax attachments.
In this post, let us discuss and analyze the benefits to family members when a life insurance policy is taken under the MWP Act.
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