Life and pension insurance

9-9-2001 | IslamWeb

Question:

What does Shariah say about pension planning with some insurance companies that compensate give you or your family if you face incident or even death and after certain period it will give you a pension like salary for life?

Answer:

Praise be to Allah, the Lord of the World; and blessings and peace be upon our Prophet Muhammad and upon all his Family and Companions.

The service you described and which is provided by some insurance companies is unlawful as it contains high risk and much gambling. In fact, the insured does not know at the time of the contract how much he will have to pay nor how much he might get. The insured may die (by accident) after just paying two installments.
As a result the insurer will have to pay what is stipulated in the contract. Similarly, the insured might pay all the installments and yet never need the services of the insurer.
On the other hand, the insurer does not know beforehand what he will have to pay for each insured as he can not predict the kind of accidents the insured might face. Anyway, all this comes under the heading of high-risk dealing which is forbidden in Shariah. The Shariah also forbids all kinds of gambling.
To conclude, it is unlawful for the Muslim to make contracts with these companies in order to avoid the punishment of Allah.
Allah knows best.

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