Wondering if life insurance is halal in Islam? Explore the concept of life insurance in Islam and learn about halal alternatives like takaful.
Is Life Insurance Halal in Islam?
Islam is a very practical religion and contains every thing that is good and beneficial to man irrespective of time place or, the stage of his cultural, social and technological development. It guides
Indemnity:
Indemnity signifies protection against loss and it therefore reflects the intention of the insured to secure himself against such a loss without seeking any profit from it. The principle of indemnity shows that it is partly based on the concept of usury and interest; partly on the indeterminate character of risk; and partly on the element of wagering which is clearly reflected in the character of risk.
Insurable Interest.
Analysis of the various components of the premium indicate that it contains an element of usury and interest also the problem of the insurable interest has further complicated the problems of insurance. Inspite of the successive insurance acts to rectify the defects in the insurable interest , the problem has remained as vague and complex as it was before the enactment of the statutes. Gambling and wagering has always been part and parcel of insurance. In all stages of its business, usury and interest playa leading role in the accumulation of funds of the insurance companies.
Muslims jurists all agree on one thing that the presence of interest, gambling, risk or uncertainty and juhala in any business contract makes it unlawful. There are not two opinions with respect to the invalidity of a contract which involves any of these four elements.
Analysis of insurance contract shows that all the four unlawful elements arc present in it in sufficient degree to render it invalid and illegal in an Islamic society .
In teres (Riba)
Riba s present in the commercial insurance business in all stages of its business, from the calculation of the premium to the Compensation to the sufferer of a calamity. The entire funds of the insurance company are invested in fixed earning investment and all the benefits paid to the insurance who have suffered a peril contain an element of riba.
- Gambling:
Many eminent economists do agree with the view that commercial insurance is a form of gambling. And gambling is clearly prohibited in the text of the Quran and Sunnah.
- Ga rar (Risk)
The element of Garar is very dominent in commercial insurance. This rise probability is present in the total business of commercial insurance involving premiums, indemnity and the insurable interest. Both the parties in the contract are totally in the dark with regard to their obligation and liabilities to each other owing to the uncertain nature of the risk. The presence of an element of Garar, therefore is evident in insurance business.
Juhala:
The insurance contract also contains an element of juhala. As the basis of the insurance contract is the probable, peril which cannot be predicted, an element ol uncertainty in unavoidable.
Thus, it can be said that all the four unlawful elements prohibited by the Quran and Suhhan are present in the insurance contract.
Elements of exploitation and unfair dealings are also present in the commercial insurance business. So we can say that insurance contracts possesses quite a high degree of the unlawful elements which makes it invalid all illegal.