A clause in your life cover will ensure that sum assured goes to nominees only and not to debtors, in case of bankruptcy.

Whether you are an entrepreneur or a high networth individual, do you know that unless you take your life insurance under a specific clause under the Married Women's Property Act, in the event of an unfortunate death of the insured, the sum insured may be taken by the creditors of the insured?

While the basic objective for anyone to opt for a life insurance policy is that in case of an unforeseen event of death or casualty, the family of the insured is protected from financial difficulties.

In consistency with that, the Married Women's Property Act is designed to protect a man's family from creditors who might stake a claim on the proceeds of the life insurance policy that are due to his wife and children.

Thus, this act provides better protection for the wife and the children of the insured even if creditors such as banks, money lenders and financial institutions clamour for repayment of their debt. Under no circumstances can the sum insured of a policy be seized by debtors.

A senior general manager with Life Insurance Corporation said the sum insured for an HNI/entrepreneur was usually huge, so he must avail of the endorsement of the Married Women's Property Act, as it comes at no extra charge or cost.

The awareness among people about this endorsement was almost zero, and it is only agents who recommend this to their customers, he adds.

To avail of this provision, the policyholder must fill up a specific form, giving details of trust and, thereby, ensuring that only his wife and/or children (nominees) are entitled to the claim proceeds under the policy.

The Act comes into play either at the time of death of the life assured or maturity of the policy. This provision is applicable only to pure life insurance policies, and not on moneyback policies and pension policies.

The prerequisite is that the life assured must be a married man and the beneficiary must be his wife and/or children. That the policy should be in force means that premiums should be regularly paid. The policyholder cannot avail of loan once the policy is under the Married Women's Property Act.

The LIC [Get Quote] GM points out that it is best advised to take this endorsement, considering it at the proposal stage at the time of taking a new policy.