Life insurance is a financial product where a policy holder pays regular premiums to an insurance provider in exchange for a lump-sum payment to their beneficiaries in the event of their death. There is an ongoing debate within Islamic scholarship regarding whether life insurance complies with Islamic law.

Some of the key questions in this debate include:

• Does life insurance qualify as gharar (excessive uncertainty) which is prohibited in Islam?
• Is the idea of financially benefitting from someone’s death unethical according to Islamic principles?
• How should the typical investment activities of insurance companies be treated according to Islam?

However, opinions still differ greatly on life insurance policies’ permissibility. Here are some of the major positions:

This article will explore the evidence behind these different perspectives on life insurance in Islam.

Arguments that Life Insurance is Haram (Forbidden)

There are several arguments made for why life insurance policies are forbidden (haram) in Islam:

A. Life insurance involves gharar (excessive uncertainty)

Some scholars consider life insurance contracts to involve excessive uncertainty (gharar), which Islamic law prohibits. This is because the payoff for the beneficiary is dependent on an uncertain future event – the policyholder’s time of death.

As one author states:

“There is an element of uncertainty in [life insurance] contracts which is referred to as Gharar in Islamic lexicon.” (Source)

B. Paying premiums feels like gambling, which is haram

Some Muslim scholars argue that paying life insurance premiums bears too close a resemblance to gambling, which is clearly forbidden in Islam:

“To some, paying premiums feels uncomfortably close to gambling – paying money year-after-year for an unknown future payoff.” (Source)

Since gambling is haram, they contend that life insurance falls into the same prohibited category.

C. Beneficiary profits from someone’s death

There are concerns that the system of life insurance payouts means the beneficiary financially benefits from the death of the policyholder. This could promote murder, which is forbidden in Islam.

D. Insurance companies invest premiums in haram activities

Most insurance companies invest their premiums into interest-bearing instruments and other activities considered haram in Islam. This renders the profits impure.

Here is a draft of Section III with quotes sourced only from the provided URLs:

Arguments that Life Insurance is Halal (Permitted)

Islamic scholars also make several arguments for why life insurance can be considered permissible (halal) under certain conditions:

A. Life insurance provides financial security for family in case of premature death

Life insurance payouts help support the deceased’s family members, which is an ethical goal in Islam:

“Life insurance is a financial planning tool that is designed to provide protection and coverage in the event of the insured person’s untimely death.” (Source)

B. Most policies allow policyholders to select investment activities

Many scholars note that policyholders can choose to invest their premiums in Shariah-compliant funds:

“The contract holder can determine where the contributions are invested in compliance with Sharia.” (Source)

This alleviates concerns over interest and improper investments.

C. The intention is to protect loved ones, not profit from death

Since the goal is to provide for one’s family after death, rather than personally profit, most scholars do not believe this trivializes death.

“The intention of the insurance is not to trade in people’s lives and deaths but to mitigate the economic hardship caused by the death.” (Source)

D. Many modern Islamic scholars approve of life insurance with conditions

While objections remain, there is growing consensus among contemporary Muslim experts that life insurance is permissible under certain restrictions.

Here is a draft of Section IV with quotes sourced only from the provided URLs:

Conditions that Enable Life Insurance to be Halal

Many Islamic scholars and bodies that approve of life insurance specify certain conditions and restrictions that can make policies acceptable under Shariah law:

A. Avoid interest-based investments

To be halal, life insurance funds should be invested in ethical Islamic compliant investments to avoid interest (riba):

“Sharia-compliant life insurance avoids investments in businesses involving alcohol, pornography or pork products” (Source)

B. Don’t over-insure to profit from death

The amount of coverage should be modest to avoid the appearance of profiting from or incentivizing death:

“The amount of insurance coverage should be relatively small so that the beneficiaries do not profit in a major way from the death.” (Source)

C. Use insurance cooperatives (takaful) where available

Takaful providers operate on a cooperative model that is accepted by many Islamic scholars:

“Muslims who want Sharia-compliant life insurance should consider […] takaful plans.” (Source)

D. Shop carefully to find a policy that meets Islamic norms

Muslims should scrutinize policies and companies to ensure adherence to halal principles:

“Muslims who want life insurance should shop carefully for a policy that meets their needs without violating Islamic principles.” (Source)