Life insurance haram is an obligation on Muslims that is stipulated by Islamic law. The main motivation for this obligation is the financial security of a person’s dependents.
In Islamic law, one has obligations toward their dependents. And the most important of these obligations is to provide them with food and clothing. Dependants also have rights to assistance; for example, parents have an obligation to maintain their child until he or she reaches puberty. It should be noted that life insurance does not replace. Any other obligation nor does it affect any other right of a person’s dependents.
What is Life insurance haram?
Life insurance haram is a financial obligation on Muslims. This obligation is based on the Prophet’s hadith:
“The most beautiful of actions to Allah, the Highest, are prayer and charity.” (Muslim 1/103)
Life insurance, as an activity that involves money, must be done according to Islamic law. The Prophet said, “Whoever gives nearness to Allah with his wealth for a righteous purpose knows Allah’s nearness.” (Muslim 1/1584)
Islamic law also serves as a guide for Muslims in other types of insurance. Such as health care insurance and car insurance.
The benefits of Life insurance haram type of insurance include the protection. Which provides for the dependents of a person who defeats life. It also provides financial support for a person’s dependents when they cannot fulfill their own obligations. It gives members of a family financial security and provides motivation to make necessary arrangements before death occurs.
According to Islamic law, dependents are always entitled to receive money from one’s estate. Islamic law also states that after meeting one’s own financial obligations. One should provide for the needs of one’s dependents as best as possible. Life insurance enables a Muslim to protect his or her dependents from losing any necessities (such as food and shelter). They are accustomed to receiving while he or she is alive.
(1) Insurance contract:
A contract between a person who wants Life insurance haram and an insurance company that offers it.
The content of the contract for Muslims when it comes to life insurance is:
– The beneficiary is the person who will receive the money after death;
– The amount of money paid by the policyholder is not permissible;
– No interest in money or anything else is involved;
If one desires Islamic life insurance. He should go to an Islamic or religious agency that offers this type of insurance. This agency must be established under religious law and no other laws can be used. The prophet (peace be upon him) said, “The Muslim does not enter Paradise until he dies as a Muslim. The Muslim does not die as a Muslim. Till he leaves some property (to the needy) after being satisfied with his or her needs. It is hoped that this will be a source of guidance for you and for others.”
(2) Insurance contract as a financial obligation:
This obligation concerns the payment of insurable goods or money from one person to another. The payment is made before the occurrence of an event agreed upon in advance. The event could be death, sickness, disability, damage, or destruction. It could also be the occurrence of some other future event. More than one event may be insured at the same time.
If a person dies, is sick, or disabled and cannot work. Then the amount of money that was paid in insurance becomes his heirs’ property. It is called indemnity in the insurance contract.
All those who are involved in this transaction must be adults, Muslim males, and free of any mental disability.
(3) Insurance contract as a non-financial obligation:
This type of obligation concerns providing assistance to someone who needs Life insurance haram. The assistance could take many forms such as treatment, surgery, or medicine.
The Prophet told us that “the Muslim whose neighbor is in dire need has an obligation to help him. If one of you sees his neighbor in dire need, he should not ask whether he is Muslim or not. He should not say, ‘If he is a Muslim I will help.’ He should help him.” (Muslim 1/1580)
In addition to the general obligation to provide assistance to needy people. They have other obligations in this field as well.
– Muslims who have had a relative die or become sick must help as much as they can;
– Muslims are obliged to do everything they can to prolong their relative’s life and treat him if necessary;
– A Muslim must try to prevent another person from becoming sick. If it can be done without violating an Islamic rule or enforcing an obligation. That cannot be fulfilled or cause harm.
(4) Conditions for life insurance:
– Life insurance haram may be necessary in cases of dire need.
– This is only necessary if the insured person is able to work. And his income would not justify his needs if he died.
– Life insurance may be necessary even if the person has no means of earning income. Because he might have to provide for his dependents.
– Life insurance is not allowed if it involves a Muslim committing a sin or violating religious law.
(5) Types of life insurance:
The options are limited to two types, whole life, and term life.
Whole life: The whole amount paid by the policyholder becomes payable upon death.
Term life: The amount paid by the policyholder is payable for a certain period of time.
Whole life insurance that gives a sum of money to a person’s heirs after his death is permissible. The only thing that makes it haram is if it involves interest.
(6) The obligation of Muslims to take out life insurance:
One must fulfill two conditions in order to benefit from Life insurance haram:
– He needs an income (i.e., he should work); and,
– If he dies without providing for his dependents, then his money will go to their care.
Life insurance is not obligatory for the person who: has enough property to support him and his dependents; or, has enough relatives to help them in case of his death.
(7) The dangers of taking out life insurance:
– If the price of life insurance haram is too large. Then it will be haram to take it out. Because it involves consuming some wealth without a clear benefit in return.
If the price is not too large, then the individual’s income should be considered. If he can afford it. Then it is permitted. Otherwise, he must try to reduce its cost as much as possible.
– If a person takes out life insurance without knowledge of the shariah, then he has made a major sin. It is recommended for him to repent.
(8) The relationship between life insurance and marriage:
Life insurance haram does not have any relationship with marriage or divorce.
Al-Hafiz Abu Al-‘Ala’ Al-Maqdisi said, “There is no marriage or divorce until there is an insurance contract.” (Madkhal 11/177)
(9) The conditions for taking out life insurance:
Adults who have the ability to work, and males who are Muslim. And free of any mental disability can take out life insurance. The amount of money paid in insurance should not be too high.