Question Summary:
Is taking out life insurance permissable in islam?

Question Detail:

Is taking out life insurance permissable in islam? I know that we should put our trust in Allah, but the facts of life in todays times is that unfortunately money makes the world go round. My mom in law (a widow), is now living off money from life insurance that was left for her from her now deceased husband. Does this mean that the money is haraam?? How is a widow in todays times supposed to survive if life insurance is haraam? What about car insurance? And as far as interest goes, does buying a house via mortgage or a car on terms, constitute taking part in interest which is haraam? Please shed light on this prevalent topic. My husband and I are really disturbed about the life insurance issue.

Answer :

In the name of Allah, Most Gracious, Most Merciful
Assalaamu `alaykum waRahmatullahi Wabarakatoh
The basic reason for the impermissibility of the current methods of insurance is not that insurance is against tawkul (placing ones trust in Allah) or taqdeer (Allah’s will and destiny).  Like any other act in this life, every measure of precaution must confirm to the principles of Shari’ah and should not in any manner cross the limits prescribed by Shari’ah.
All conventional insurances; life and others, is protecting oneself against future losses in exchange of the monthly premiums.
It is a well settled principle of Shari’ah that every transaction between two parties in which the payment by one party is certain and mandatory while payment by the other party depends upon a contingency (which may or may not occur) is included in qimar and gharar and is therefore unlawful.
(Ahsanul Fatawa 24/7 H M Saeed); (Jadeed Fiqhi Masa’il 432/1 Naemiyah);(Takreer Tirmizi 98/1 Meman Islamic Publishers);(Contemporary Fatawa 185 Idara Islamiya)
The procedure of buying a commodity on loan or mortgage is also prohibited.
When an individual buys an item on this basis, then on paying back, he has paid more then what was loaned.  This is interest which is haram.  Any excess payment made over and above the principal amount is riba and thus haram.
(Contemporary Fatawa 232 Idara Islamiya)
And Allah knows best
Wassalam
Ml. Ahmed Mohomed Pandor,
Student Darul Iftaa
Checked and Approved by:
Mufti Ebrahim Desai
Darul Iftaa, Madrassah In'aamiyyah