What is the islamic ruling on taking out a life insurance policy in the uk?

QUESTION:

What do the scholars and muftis of the mighty Sharī’ah say regarding taking out life insurance policies in the UK?

Questioner: Faizan from UK

ANSWER:

بسم اللہ الرحمن الرحیم

الجواب بِعَونِ المَلِکِ الوَھاب اللھم ھدایۃَ الحَق والصواب

The money collected from life insurance policies is regarded as a debt with a life insurance company. Anything which is received back beyond this amount is interest because it is conditioned in the contract. Every debt that brings about a further benefit then that benefit is interest. Just as it is mentioned in Hadīth,

قَالَ رَسُولُ الله صَلَّى الله عَلَيه وسَلَّم “كُلُّ قَرْضٍ جَرَّ مَنْفَعَةً فَهُوَ رِبًا

The Noble Prophet of Allāh, may the peace and blessings of Allāh be upon him, said, “Every debt that brings about a benefit, so it is ribā (interest).”

[al-Jāmi’ al-Saghīr, Hadīth no. 6336]

Life insurance is also qimār (gambling). This is because if the policy holder fails to pay any one of the instalments, then the life insurance company will keep all of the instalments that he has already paid. Life insurance is thus impermissible and prohibited.

My master A’lā Hazrat the Imām of the Ahl al-Sunnah Ahmad Ridā Khān, may Allāh have mercy upon him, was asked a question regarding life insurance which he answered by saying this is gambling and to some extent there is a loss of money in this. Even considering the benefit imagined which is hoped for, if the debt is received back, then a company is not foolish enough to give £1000 or £1500 from interest earned, rather it is the lost wealth of others, from amongst whom are Muslims also, and that money can never be permitted for him in any way.

Allāh Almighty says,

“لاتاکلوا اموالکم بینکم بالباطل“

{And do not unfairly consume the wealth of each other} [Sūrah al-Baqarah, v. 188]

[Fatāwā Ridawiyyah, vol. 17, pg. 381]

However, in a non-Muslim country, life insurance may be permissible with a few conditions:

The life insurance company owners must all be non-Muslims. There should not be a single Muslim partner/shareholder.
A Muslim should be certain it will be beneficial for him i.e. he should have an overriding opinion that in his current state he will be able pay the necessary instalment amounts for the designated next 3 years or for a wider time period [i.e the minimum period in the contract after which the amount can be paid out]. This is because an invalid contract (‘aqd fāsid) can only be contracted with a non-Muslim when there is a definite benefit for a Muslim. If the policy is terminated by him before 3 years are completed [or whatever the designated minimum period may be] then all his paid instalments would be lost and this is loss for a Muslim.
A Muslim should not be forced into any disobedience due to this undertaking.

Just as my master A’lā Hazrat the Imām of the Ahl al-Sunnah Ahmad Ridā Khān, may Allāh shower mercy upon him, while stating the conditions for the permissibility of life insurance has mentioned that whichever company this dealing is carried out with, if there is even one Muslim partner in it, then this dealing is a definite, absolute, harām as it is gambling and whatever increase is gained is interest and these two are harām and severe major sins. If there is absolutely no Muslim [partner] then it is permissible here, as long as in maintaining one’s bodily well-being and other matters one is not forced into sin. It is permissible as there is no form of loss in it.

If he remains alive for 20 years he will get all his money back, in fact he will gain an additional amount above that. If he passes away before, then his inheritors will get even more. For example if he died after a year then he would have given 246 and a quarter rupees in total instalments and 5000 rupees will be returned to them. Yes, it is necessary that the increased amount received is not taken as interest but should be considered as a non-Muslim’s wealth being given to him of his own will without any deception; this is permissible.

[Fatāwā Ridawiyyah, vol. 23, pg. 599]

In another place he has mentioned that when this life insurance is run by the government and there is no form of loss to oneself, then this is permissible and there is no harm in that. However the condition is that, as a result of it, there is no precautionary measure binding upon him which opposes the Sharī’ah such as the forbiddance of fasting or Hajj.

[Fatāwā Ridawiyyah, vol. 23, pg. 605]

Furthermore, in answer to another question, he states that this is absolute gambling and totally void as it does not fall under any transaction according to Sharī’ah. In such a place the permissibility of invalid transactions without an excuse is conditioned with it being in such a form that from every perspective there should be self-benefit and this is not expected from such companies, therefore there is no permissibility just as the absolute research Scholar [al-Imām ibn al-Humām] has researched in Fath al-Qadīr.

[Fatāwā Ridawiyyah, vol. 17, pg. 365]

واللہ تعالی اعلم ورسولہ اعلم صلی اللہ علیہ وآلہ وسلم

کتبہ ابو الحسن محمد قاسم ضیاء قادری