Life insurance policies in Malaysia

30-9-2002 | IslamWeb

Question:

I understand that life insurance is Haram and not allowed in Islam. However, many Malaysian Muslims still hold active life insurance policies because this industry started in Malaysia since 1973 and there are still many active Muslim insurance agents. The Takaful industry (Shari'a approved insurance) only became available in Malaysia since 1984. So, should we ask Muslim policyholders of life insurance to terminate their policies? Or be replaced with Takaful products? If for some reason, they do not want to terminate the life insurance policies, is the return of these policies Halal (allowed in Islam)?

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Answer:

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

No doubt life insurance is Haram, since it is a form of risk and it is included in gambling, which Allah has prohibited in the Qur'an.
Based on the above-statement, it becomes Haram for every Muslim to participate in life insurance if it is done out of one's own volition.
But, if it is obligatory, then one will not be sinful - Insha Allah. Only those who put such law into effect are sinful. However, one is not allowed to receive from insurance company except the sum of money that he paid.
Allah, The Exalted, Says: {… but if you repent, you shall have your capital sums. …} [2: 279].
And if one takes more than what he paid, it is his duty to spend the extra amount of money on behalf of the common interests of Muslims. Furthermore, one has to get rid of insurance contract if he can.
Anyway, if there are some societies or organizations that are based on the basis of co-operation and joint liability as stated in Sharia, then there will be no harm to participate in their activities, it is better since such an action will result in great reward, especially if done with good intentions.
Allah knows best.