APPLICATIONS OF LIFE INSURANCE
Married Women’s Property Act :
Section 6 of the Married Women’s Property Act, 1874 provides for security of benefits under a life insurance policy to the wife and children. Section 6 of the Married Women‟s Property Act, 1874 also provides for creation of a Trust.
Beneficiaries under Section 6 of MWP Act :
- Wife alone
- Wife and one or more children jointly
- One or more children
Features of a policy under the MWP Act :
- Each policy will remain a separate Trust. Either the wife or child (over 18 years of age) can be a trustee.
- The policy shall be beyond the control of court attachment and even the life assured.
iii. The claim money shall be paid to the trustees.
- The policy cannot be surrendered and neither nomination nor assignment is allowed. .
iv If the policyholder does not appoint a special trustee to receive and administer the benefits under the policy, the sum secured under the policy becomes payable to the official trustee of the State in which the office at which the insurance was effected is situated.
Key Man Insurance :
It can be described as an insurance policy taken out by a business to compensate that business for financial losses that would arise from the death or extended incapacity of an important member of the business.
Keyrnan is a term insurance policy where the sum assured is linked to the profitability of the company rather than the key person‟s own income. The premium is paid by the company. This is tax efficient as the entire premium is treated as business expense. In case the key person dies, the benefit is paid to the company. Unlike individual insurance policies, the death benefit in keyman insurance is taxed as income.
a) Who can be a KEYMAN?
A key person can be anyone directly associated with the business whose loss can cause financial strain to the business. For example, the person could be a director of the company, a partner, a key sales person, key project manager, or someone with specific skills or knowledge which is especially valuable to the company.
Mortgage Redemption Insurance (MRI) :
It is an insurance policy that provides financial protection for home loan borrowers. It is basically a decreasing term life insurance policy taken by a mortgagor to repay the balance on a mortgage loan if he / she dies before its full repayment.