Question Summary:
My father took out a life policy. My mother was the original beneficiary and she gave her share to us two sisters. My mother passed away 7 years ago and my father passed away 2 years back. Where will the money go?

Question Detail:

My father took out a life policy in the early 70’s. The beneficiary originally was my mom, but she passed away 7 yrs ago and my dad passed away 2 years ago. Before my mom passed away it was told to my sister and I, with our spouses present, that the money from the policy is for the 2 sisters (my sister and I ). Does this form part of the inheritance (there are 2 brothers) or should it be taken as a gift given to the girls while our parents were alive, but could only be taken possession of after their deaths?

Answer :

In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
A life insurance policy is haram as it is based on interest, gambling and uncertainty (gharar). [1] Make tawbah and istighfār for your father for engaging in haram dealing.
The payout of the life insurance policy constitutes:
a.      Premiums paid by your father towards the insurance policy.
b.     Surplus amount
You may redeem the premiums which were paid towards this insurance policy. These premiums will distributed along with the inheritance of your father. [2]
The surplus from the insurance policy is haram and must be disposed off to the poor and needy. [3]
Your mother giving the benefits of the insurance policy to you’ll is insignificant.
And Allah Ta’āla Knows Best
Mawlana Faisal bin Abdul Hameed
Student, Darul Iftaa
Canada
Checked and Approved by,
Mufti Ebrahim Desai.
www.daruliftaa.net