What is the ruling on life insurance?

April 21 by Dr. Mohamed Moussa


This question is frequently asked among members of the Muslim community in America as they want to know the opinion of the Islamic law on this issue. However, the answers have confused people as they are so various and carry major differences: There are scholars who make life insurance lawful, there are others who prohibit it, and there are neutral ones expressing no opinion on the topic. To discuss this issue, we have to cover the following points:

1. What is life insurance?

Life insurance is a legal agreement between the insurance policyholder and the insurance company. The policyholder pays monthly premiums he agreed with the insurance company on, and if he dies, the insurance company pays his beneficiaries an amount of money (e.g. his family or whoever he chooses). In most cases, the beneficiaries are usually those who are harmed by the death of the insurance policyholder; therefore, we conclude that life insurance is : the removal or mitigation of the harm affecting the family, relatives, or others (determined by the policyholder), as the result of the death of the policyholder.

2. Life insurance and health insurance are similar

Based on the aforementioned definition, it can be seen that life insurance does not substantially differ from health insurance.

Health insurance aims to remove or mitigate the damage (i.e. the incapacity of affording medication and medical treatment) that the insurance policy would endure in case he needs medication and medical treatment. Health insurance is unanimously [Islamically] lawful, and nobody questions it! The jurisprudential maxim affirms that “two similar cases cannot be separated [in verdict], and two different cases cannot be similar [in verdict].”

3. The major arguments that they use to claim the unlawfulness.

Those who prohibit life insurance base their verdict on a number of assumptions that life insurance and other insurances satisfy [in their opinion]: gambling, ambiguity [in transactions], betting, interest, and ignorance.

However, they attribute two problems to life insurance: i) life insurance is a challenge against the divine destiny, and ii) it contradicts relying upon Allah (God).

The objective here is not to generally discuss insurances and consequently cover all the aforementioned five assumptions (i.e. gambling, ambiguity [in transactions], betting, interest, and ignorance); one cannot simply project those five issues onto life insurance when they are not well grasped [in his mind], and their meaning and the reasons why the upright Islamic law prohibits them are not well defined.

If we grasped the definitions of these unlawful issues, we contemplated the reason of their unlawfulness, and we excelled in examining the life insurance agreement based on them, we would conclude that life insurance does not match any of these unlawful issues as life insurance does not satisfy the reason behind their unlawfulness.

The fundamentalists always say: unlawfulness correlates with the existence or absence of the reason behind it (e.g. if when the reason exists, the issue is unlawful, then when the reason disappears, the issue becomes lawful).

Let us discuss the two reasons exclusive to life insurance:

a. A challenge against the divine destiny

With regards to claiming that insurance is a challenge against the divine destiny, this issue is due to the label “life insurance,” which might lead some to think that it is an insurance against death; as if the insured (i.e. policyholder) is protected [by the insurance company] from death once he signs the contract, and he is expected to live at the very least for the period the contract covers, or else the insurance company loses the insurance benefit [by paying it to his beneficiaries] in case he dies.

This meaning is far from the truth of the contract. As we have already defined it, the contract is “the removal or mitigation of the damage affecting those who are impacted by the death of the insured person.”

It is inconceivable to say that once the company signs the contract, it guarantees life or immortality to the insured for a specific period or until a particular moment. It is also unreasonable to claim that the purpose the insured person signs the contract is to obtain from the company an assurance guaranteeing his life or postponing his death.

I would dare say that the insured person is the one who frequently mentions death and is more prepared for it. Consequently, he attempts to arrange the life of his family after his death. The reluctance of many people to engage in life insurance is often due to their pessimism or discomfort about death.

b. Life insurance opposes the idea of relying upon Allah

This one seems to be one of the most glaring oddities! What is meant by relying on Allah? Reliance on Allah means to make use of all available means, then having a heart attached to Allah, Glorified and Exalted be He. Neglecting the means is indifference, not reliance on Allah. The means to providing financial and emotional security for the children and relatives after the death of the head of household are numerous in Islamic law. This includes:

i) The will is set to one-third.

Arranging the inheritance among heirs, and determining and limiting the [amount to be allocated through a] will to one-third [of the estate] is done thanks to absolutely clear verses of the Quran in addition to authentic Hadiths. The Almighty says:

“After any bequest which was made or debt, as long as there is no detriment [caused]. [This is] an ordinance from Allah , and Allah is Knowing and Forbearing.”

(Surah An-Nisaa: 12)  

The Prophet, prayers and peace be upon Him, set the limit of damage [to the heir because of the will] to one-third [of the estate]. Anything less than one-third is fairly good, but exceeding one-third might cause harm to the heirs.

If trusting in Allah meant not making arrangements, then the Islamic law would not prohibit the man to make a bequest of all of his money even though he deprives his heirs from it.

ii) The Prophet commands to leave children wealthy and warns against depriving them and leaving them poor, begging people

The Prophet, prayers and peace be upon Him, said:

“To leave your heirs rich is better than to leave them poor, begging of others.”

(Sahih Al-Bukhari)

He also warns us from neglecting the heirs:

“It is sufficient sin for a man that he neglects he whom he maintains.” (Al-Bukhari, Sahih Al-Bukhari)

Are those commandments incompatible with the reliance on Allah?!.

iii) Blood-money in case of accidental killing

As we know, there is no punishment made for an unintentional act. Therefore blood-money cannot be seen as a punishment, but rather as a sum of money paid to the heirs of the victim to ease the harm of their losing the head of their household.

If blood-money were a punishment, then before that, the legal retribution should be similar to that of intentional killing, and therefore the blood male relatives [of the unintentional killer] would not assume the responsibility of an act they did not commit. The golden Islamic rule is: “No bearer of burdens will bear the burden of another.” But since blood-money is for helping the family of the deceased head of household in bearing the burdens of life, the Islamic law engages the blood male relatives [of the unintentional killer] in this matter. In fact, any Muslim can participate [in raising blood-money for the victim’s family].

This is perhaps the reason why many of our scholars conclude that blood-money for a woman should be half that of a man because women in Islamic societies are not depended upon [financially] and are not required [to make financial contributions towards the household]. Nevertheless, many scholars believe that blood-money of women is equal to that of men (e.g. Dr. Yusuf al-Qaradawi issued a fatwa, which was adopted by the Qatari legal system).

iv) The pension system in most Islamic and Arab states

It is a sum of money which is withheld from the employee while he is employed so that when he retires, because he reached retirement aged or became disabled, he will get a monthly pension, and if he dies, the pension will be allocated to those whom he was financially supporting until they become independent (e.g. when his daughter gets married or when his son finishes his studies and becomes to work). And in case the daughter later gets divorced, she holds the right to get her father’s pension per the legislation regulating the pension system in Egypt, which also indicates that the widow holds the right to her late husband’s pension until she dies.

Is this pension system not similar to life insurance?

4. People's reality in America and western countries

The Muslim community in America and western countries is a group of families and individuals severed from their big families. In America and the West, financial solidarity is extremely difficult: sponsoring shelter and food for a family is not easy. This makes life insurance almost a necessity. Until we find alternatives, I believe that life insurance is set to be a solution for many families, and this is what we call “realistic jurisprudence.”

5. The ruling to which hearts are assured and which the soul desires.

On the one hand, I conclude that life insurance is an obligation for any head of household who is certain that his family is going to be really harmed if he does not insure himself with life insurance. On the other hand, life insurance is recommended (but not required) for a man who doubts that his family will be harmed after his death. Else, life insurance is permissible for the rest of the cases.

6. The head of household is the only one who holds the right of having insurance.

Insurance can only cover the head of household -husband or wife- whose family would be financially damaged after their death. Life insurance is not applicable to others who are not heads of households (e.g. children) because nobody is financially damaged as a result of their death.

7. Adding charities as beneficiaries

It is possible to allocate a percentage of the insurance benefit towards mosques and Islamic institutions to compensate them for losing one of their donors. And I believe that adding charities as beneficiaries can help the other beneficiaries from a tax perspective. And Allah knows better.

Allah knows better, and surely He is the Arbiter of success.

Written by Dr. Mohammed Moussa.

President - Tri State Imams' Council