Buy term insurance under this act to ensure money goes only to your wife, kids; check details

When you buy a term insurance policy, your main goal is to make sure your family is financially secure if something happens to you. If you're married and want to protect your wife, your children, or both, there’s a powerful option you might not know about: buying the policy under the Married Women’s Property Act (MWPA), 1874.

Here’s a crucial financial move every married man should consider — one that could shield your family from your unpaid debts, even after you’re gone. According to CA Nitin Kaushik, a Chartered Accountant and financial educator, this simple step while buying life insurance can legally protect your wife and children from losing your hard-earned cover to creditors.

Under normal circumstances, you can name your immediate family, like your spouse, children, or parents—as nominees in your policy. Thanks to the Insurance Laws (Amendment) Act, 2015, these ‘beneficial nominees’ are legally entitled to receive the death benefit, even if there are other legal heirs. But here’s the catch: as the policyholder, you still have the right to change the nominee during the policy term. This means your wife and kids’ claim to the money could be at risk if you update the nomination later.

There’s another potential issue. If you have outstanding debts when you pass away, your creditors can claim the insurance money before it reaches your family. So even if your spouse or kids are listed as nominees, they might not receive the full payout, or any at all.

What to do? Opt to buy your life insurance under the Married Women’s Property (MWP) Act, 1874 — a little-known but powerful legal provision that’s still valid today.

What is the MWP Act?

The MWP Act was originally enacted to protect the financial rights of married women. When a life insurance policy is purchased under this Act, the proceeds from the policy are legally earmarked only for the policyholder’s wife and/or children. No lender, bank, or even court can override this claim — even if the policyholder dies with outstanding loans or liabilities.

According to Section 6 of the MWPA, if a married man buys a life insurance policy on his own life and clearly states that it’s for the benefit of his wife, or wife and children, then that policy becomes a legal trust. This means the proceeds are legally protected and will only go to the beneficiaries mentioned—no one else can claim it.

In simple terms: once you buy a policy under the MWPA, the money is locked in for your wife and/or kids. Creditors can’t touch it, your parents can’t claim it, and even you can’t change or control it once it’s set up. It’s not part of your estate and can’t be used to repay loans or settle disputes.

Why this is a game-changer

Imagine this scenario:

Mohit, a married man, buys a Rs 1 crore term life insurance policy under the MWP Act, naming his wife and children as beneficiaries. During his life, he takes on several liabilities — a Rs 25 lakh home loan, Rs 4 lakh car loan, and Rs 5 lakh personal loan from family.

If tragedy strikes and Mohit passes away, his wife still receives the full Rs 1 crore insurance payout. None of the lenders — not even the bank or relatives — can claim a single rupee from this amount. That entire sum is legally protected for his family.

Without the MWP clause, however, Mohit’s creditors could potentially claim the insurance amount to recover dues, leaving his dependents financially vulnerable.

Why most people miss this

Many people wrongly assume that life insurance proceeds are automatically safe from creditors. But unless the policy is specifically taken under the MWP Act, those funds are legally part of the deceased’s estate and may be subject to claims.

The best part? All it takes is a simple checkbox at the time of purchase. You must ask your insurer to issue the policy under the MWP Act before buying it — you cannot add this clause later.

This one small decision can create a legal shield around your family’s future, no matter what financial situation you leave behind. As Kaushik puts it:
“If you’re married and buying life insurance, do this one thing right — or risk everything going wrong.”

For any married man with dependents, the MWP Act is a no-brainer insurance hack — a powerful way to ensure that your life cover truly serves the purpose it was meant for: protecting the ones you love.