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Life Insurance - Halal or Haram?

Posted 06 December 2010 - 09:38 AM (#1) User is offline   good4every1 

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Asalam-0-Allykum,
I want to know about Life Insurance, whether it is Halal or Haram?

Here I also want to share some information regarding Life Insurance and Goods (car, building, etc etc) insurance. I talked with a person who is currently teaching in some institute about life insurance and goods insurance, he said that in good(s) insurance if there is no damage then you'll lost your money that is why it is haram, where as in life insurance case you will get back your money (No Loss) after the specified time period. In the end he said that Life insurance is halal with some limitations which he did not told me.

I want to know about this, Kindly provide some authentic proofs.

Thanks and Regards,Adeel
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Posted 06 December 2010 - 10:21 AM (#2) User is offline   junaidrafique2007 

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AA

Life insurance as a concept is halal. It's Islamic roots lie in a number of foundations: namely the bait ul maal where some of the money was given to widows and orphans. It is also found in the Diyah system that was set up by the tribes of Arabia to protect a person if he killed someone from another tribe and had to pay blood money.  Thus mutually guaranteeing one another in case of calamity or death is Islamic.

The problem lies in the modern conventional type of insurance where the following exists:

1) Gharar -  speculation/uncertainty/fraud2) Ribba -  3) Gambling

The safest way to avoid the above is to take out a whole of life life insurance policy which covers you until you actually die (no speculation there since everyone will die one day). Then to have it investment linked to halal funds where you can negate the ribba element of the transaction.  This is the closest one can get to a conventional halal life insurance.

Here is a fatwa/opinion on this:

The third opinion is presented by the late Sheikh Mustafa al Zarka. 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 two conditions: that it contains no Riba clause and that its subject (insured thing) be legitimate. These two 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 the Shari'ah approved stocks or mutual funds). They also rule out insuring a prohibited activity such as casinos.
WS
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