Protecting the policy moneys

Policies purchased under Section 6(1) of Married Women’s property Act, 1874

I have been taking you through aspects of assignment from the angle of protecting policy moneys and life insurance marketing. We shall come back to assignment a little later. Remember, assignment cancels nomination, with one exception already discussed.

There is another provision of law that does not allow nomination and it absolutely protects policy moneys from creditors of husband / father. And this is a wonderful marketing tool for those professional salesmen who approach prospects after good homework. Many prospects and policyholders these days  are capable of distinguishing the good, the bad and the ugly among salesmen.

There are many provisions that protect life insurance policy moneys. Those interested may go through the chapter on ‘special provisions that protect policy moneys’ in the book ‘Modern Trends in life insurance’ or a paper with the same name in the Journal of Insurance Law (author V.N.S.Pillai), both published by ICFAI University Press. Please visit their site or contact them for copy of the paper.

Let us read Section 6(1) of MWP Act, 1874:

6. Insurance by Husband for Benefit of Wife

(1)    A policy of insurance effected by any married man on his own life, and expressed on the face of it to be for the benefit of his wife, or his wife and children, or any of them, shall enure and be deemed to be a trust for the benefit of his wife, or his wife and children, or any of them, according to the interest so expressed, and shall not, so long as any object of the trust remains, be subject to the control of the husband, or to his creditors, or form part of his estate.

            When the sum secured by the policy becomes payable, it shall,  unless special trustees are duly appointed to receive and hold the same, be paid to the Official  Trustee of the [state] in which the office at which the insurance was effected is situate, and shall be received and held by him upon the trusts expressed in the policy, or such of them as are then existing.

And in reference to such  sum he shall stand in the same position in all respects as if he had been duly appointed trustee thereof by a High Court, under Act No.XVII of 1864 [to constitute an Official Trustee], section 10.

Nothing herein contained shall operate to destroy or impede the right of any creditor to be paid out of the proceeds of any policy of assurance which may have been effected with intent to defraud creditors.

We shall see in detail in the coming Posts how a policy purchased under section 6(1) of the MWP Act, 1874 works.

Key Words

Married Women's Property Act, 1874

Official Trustee

Trust