Life insurance is a modern financial product that many find useful to protect their families and assets.
However, in light of Islamic law, questions arise about its permissibility. Islamic jurisprudence scrutinizes all transactions to ensure they are free from uncertainty (gharar) and usury (riba). In this context, life insurance has been examined by scholars to determine whether it complies with Shari’ah.
Renowned scholars, including Shaykh Ibn Baz (may Allah have mercy on him), have addressed the issue. They explain that life insurance, whether for one’s life or possessions, is impermissible because it involves both gharar and riba.
These elements introduce uncertainty and risk, which Islam seeks to avoid in economic transactions. The purpose of such rulings is to protect the ummah from harm and ensure that financial dealings are conducted in a transparent and just manner.
Is Life Insurance Permissible?
Haram.
Life insurance is not permitted in Islam because it involves elements that contradict the principles of Shari’ah.
This is the definition of gharar. Furthermore, the involvement of interest in any form is strictly prohibited, as stated in the Qur’an:
“…whereas Allah has permitted trading and forbidden riba.” [al-Baqarah 2:275]
The combination of these factors renders life insurance impermissible according to Islamic teachings.
Evidence
- Shaykh Ibn Baz (may Allah have mercy on him):
- He was asked about life insurance and replied that insuring one’s life or possessions is haram because it involves gharar (excessive uncertainty) and riba (usury or interest).
- Qur’anic Principle:
- Allah has forbidden transactions based on riba and deceit to protect the ummah from harm. The verse “…whereas Allah has permitted trading and forbidden riba” (al-Baqarah 2:275) underlines this principle.
- Prophetic Tradition:
- The Prophet Muhammad (peace and blessings be upon Him) forbade all forms of deceit in transactions, which reinforces the rejection of contracts that involve uncertainty and undue risk.
- Scholarly Consensus:
- Both classical and contemporary scholars agree that any contract that includes gharar and riba, such as life insurance, does not comply with Shari’ah.
Bottom Line
The guidance from Shaykh Ibn Baz and other scholars makes it clear that while protecting one’s family and assets is important, engaging in transactions that carry these risks is not permissible in Islam.
May Allah guide us to make choices that are beneficial both in this world and the Hereafter, and protect our finances from harm. And Allah knows best.
Got a question? Feel free to ask mufti and get quick answers.
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