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     | Friday, December 29, 2000 - 02:43 pm Life insurance is an insurance that pays your beneficiary an agreed sum of money after you hit the bucket. Does Islam allow it, and if not why not???
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| | Saturday, December 30, 2000 - 05:00 am AAWW Mr Equlizer.The following question is similar to the one that you are asking. I hope this will shed some light on your question Siciid Q)Salam, I was automaticly enrolled for life insurance with my company. I would to know if I must cancel the life insurance policy or not. Can you please explain if it is haram or halal and why? Wassalam. Ans) In the circles of contemporary Shari'ah scholars, There are three opinions about Life insurance, and for that matter all types of insurance too. They all recognize that it is a new contract not known in the history of Fiqh. A minority consider it haram and it recruits all kinds of argument against it including riba, gambling, gharar and speculation on the will of Allah. This view does not carry much weight. The second view is that it contains Gharar because no one knows whether the liability of the insurer ( the company) will ever materialize nor when it will , if ever. This is a serious gharar that lead to a major defect in the contract. It is therefore forbidden. (more to come on this opinion). The third opinion is presented by The late Shaikh Mustafa al Zarka, until his death last July he was the uncontested most knowledgeable Shari'ah scholar. He argued that the gharar in the contract is remedied by the fact that it is a contract based on overwhelming statistical knowledge and the application of the theory of probability. With this in mind there is no gharar on the part of the insurer. and the contract is permissible with 2 conditions that it contains no riba clause and that its subject (insured thing ) be legitimate. These 2 conditions rule out regular fixed - return life insurance because the value of the policy is the outcome of investment premiums at a compounded rate of interest, (while variable - return life is permissible if the funds are invested in shari'ah approved stocks or mutual funds). They also rule out insuring a prohibited activity such as casinos of legs of belly dancers. The advocators of the second opinion argue that the gharar problem applies only in exchange contracts. If the contract is modified and restructure on the basis of cooperation or mutuality, where there will be an association of the insured instead of a profit motivated insurer company, the gharar is then tolerated. This is so because the relation between the association and its members become based on contribution ( tabarru') rather than exchange and a tabarru' can accommodate certain conditions ( i,e., that the association compensate in case a hazardous event happens) . On the basis of this all the "Islamic insurance companies" were established. In this regards al Zarka adds that if a mutual or cooperative insurance exists he prefers it to profit motivated insurance out of his respect to the opinion of opponents. There is an old argument ( from the 1950s), even by those who oppose insurance, that whenever insurance is forced by law, one must do it and one is excused, from shari'ah point of view. This include car insurance, social security, workman compensation, and employer's imposed insurance if it is not optional for the employee to this I add another element that if the insurance provided by the employer is paid completely from the employer, i.e., given as a fringe benefit without deducting any part of the premium from the pay checks, then it is a kind of grant from the employer and if a hazard happens the paid policy amount is halal because the it is an outcome of the grant. Now think for yourself: if your life insurance is only term life, you may apply the opinion of shaikh Zarka, and if it is imposed by employer, you also have room to accommodate, and if it is a grant from employer it is also tolerated. Otherwise you need to see the specifics of the contract you have and determine, in the light of the above briefing, whether you keep or seek to withdraw from it.****End Of the Fatwa******** source of this fatwa http://www.islamonline.net/fatwa/english/FatwaDisplay.asp?hFatwaID=11158 I hope this answers your question. Siciid
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