Sharī’ah model of Life
Insurance (Family Takaful) does not mean to insure one’s life, but it is a
financial transaction undertaking to protect widows, orphans and other
dependents of the deceased (assured) against future unexpected financial
risk. The conventional system, however,
offers a life insurance policy, which may not be free from ribā
(interest), or some other elements, which are not recognized by Islamic
teaching.
Based on the observation of
the practices of life insurance policies under the conventional system many
Muslims, and even some Islamic scholars, diametrically oppose the idea of life
policies, but have not come up with an Islamic alternative model to the
conventional one which would meet the expectations of contemporary Muslims and
would protect widows, orphans and other dependents in society from unpredicted
future financial risk.
Hence, the
central idea of the model of an Islamic life insurance is that, it is not a
policy to insure one’s own life, but is a
financial transaction relying on the principles of mutual cooperation to
undertake a responsibility towards safeguarding widows, orphans and other
dependents of the deceased (assured), from future financial risk, which does
not involve the elements of ‘Ribā’
but
is operated along the lines of the following principles of the ‘al-Mudhārabah’ financial technique, while neither
clashing with the principles of ‘Mīrath’ nor with the
principles of ‘Wasiyah’.
In an Islamic model of life
insurance policy the nominee(s) is not an absolute beneficiary(s) but a mere
trustee
who is under a duty to obtain benefits over the policy and distribute them
among the heirs of the deceased (assured), according to the principles of ‘Mīrath’ and ‘Wasiyyah’.
This article
attempts to come up with a solution to the operation of an Islamic model of
life insurance policy in contemporary Muslim societies, refuting the
misconceptions that some Muslims have placed against the validity of a life
insurance policy.
ADDRESSING
THE PROBLEM
Central Idea of
Life Insurance under the Islamic discipline is quite different from the one,
which is practiced under the conventional system. A Islamic model of a life insurance policy,
however, is a financial transaction based on the principle of the ‘al-Mudhārabah’ financing
technique relying on the principle of mutual cooperation, undertaking a
responsibility towards safeguarding widows, orphans and other dependents of the
deceased (assured/policy holder) from an unexpected future material risk. The nominee(s) in the life insurance policy
who is appointed by the assured, is not an absolute beneficiary(s) over the
policy but a mere trustee who receives the benefits and distribute them among
the heirs of the deceased (assured) according to the principles of ‘Mīrath’
(inheritance)
and ‘Wasiyyah’ (bequest).
Where
the assured is still alive upon the maturity of the policy period, he has the
right to claim from the insurer the paid-premiums, the share of profits made
over the paid premiums, plus bonus and dividends according to the company
policy. But if the assured dies at any
time before the maturity of the policy, the claim of the nominee(s) includes
the paid-premiums, the share of profits made over the paid-premiums, bonus and
dividends according to the company’s policy plus a donation from the company’s charitable fund
according to the financial condition of the beneficiary(s) of the assured.
As for the claim for benefits over a life
insurance policy, the death of the assured does not necessarily have to be
natural or accidental but any cause of the death (even an unlawful death like
suicide or being killed in the act of a crime etc.), counts so long as the
death of the assured is proved. This is
because the death of the is determined by Allāh (SWT) as is stated in
the holy Qur’an:
“No soul can die except by the
permission of Allah (SWT), the term being fixed (by Allah SWT)….”
Moreover, as
regards the act of suicide or any other crimes, the doer himself/herself is
solely accountable to Allah (SWT) for his/her own act. As Allah (SWT) ruled in the holy Qur’an:
“…They shall reap the fruit of what they
did, and you what you do…”
Thus, it does not
mean that a criminal will simultaneously be accountable for his/her own
wrongful act and also be depriving from other rights. It is a fundamental right of everyone in
society to enjoy in business and other matters that which they may require
lawfully. Such personal rights should be
exercised by every equally regardless of whether one is innocent or a criminal
as long as the rights within the lawful sphere.
Hence, life insurance policy is a transaction whereby the assured’s
beneficiary(s) should not be deprived due to the assured’s criminal act
(i.e. act of suicide, or being killed for a wrongful act etc.). The agent in a life insurance policy is not
supposed to be paid his salary out of the assured’s premiums because
they work for “The Company” and thus should be paid by “The
Company”. For example since a life insurance policy is
based on the principle of ‘al-Mudhārabah’, whereby the involved parties i.e.
insurer, assured, agents share the profit over the business which is partly run
by the assured’s paid-premiums, therefore,
the interest for the agent in a life insurance policy is a share of profits
made over the assured’s paid premiums plus dividend
and bonus according to the company’s policy. As regards to the insurable interest in a
life policy under the Islamic model, the policyholder himself has an insurable
interest if he is alive upon the expiry of the policy period. If the assured dies at any time within the
policy period, the insurable interest is to be vested only in the heirs of the
assured according to the principles of ‘Mīrath’ and ‘Wasiyyah.’
LIFE
INSURANCE & ITS RATIONAL OUTLOOK
Having an Islamic
life insurance policy does not mean that one has insured one’s own life, but it
is a fair financial transaction catering for the benefits of certain helpless
people in the society. The rationale
behind of having a Sharī’ah justified life
insurance policy could be summed up as follows:
1) It is one of the means of providing a
material safeguard for offspring and is thus in line with the saying of the
holy prophet SAW. He (SAW)
spoke to this effect:
“… it is better for you to leave you
off-spring wealthy than to leave them poor, asking others for help…” [Narrated by Saad b. Abi Waqqas
(r.a)]
2) Having a life
insurance policy is a future material security for widows and other dependents
of the deceased (assured). The Holy
Prophet (SAW) in fact encouraged the providing of security for the widows
and poor persons as he highlighted in one of his traditions:
"The
one who looks after and works for a widow and for a poor person (dependent), is
like a warrior fighting for The Cause of Allah (SWT), or
like a person who fasts during the day and prays throughout the night. “
[Narrated by Safwan bin Salim ( r.a)].
3) A life insurance policy guarantees a
future material protection for, inter alia, orphans, and it is again
justified by the saying of the holy Prophet (SAW):
“I and the
person who looks after an orphan and provides for him, will be in paradise like
this, putting his index and middle finger together….” [Narrated by Sahl bin Saad (r.a)].
4) Having a life insurance policy provides
certain persons (as widows, orphans and so on) with a protection from unexpected
future material difficulties, which may result a hardship for the life of these
people. The Holy Prophet advised
the ummah to protect one from any form of hardships and difficulties
when he said to the effect:
Whosoever
removes a worldly grief from a believer Allah (SWT) will remove from him one of
the grieves of the day of Judgement.
Whosoever alleviates a needy person Allah (SWT) will alleviate from him
in this world and the next… [Narrated by Abu Huraira ( r.a)].
5) Having a life insurance policy is like
taking an initiative towards reducing the poverty rates and contributing
towards a reasonable comfortable life without such difficulties. It is thus justified by the Qur’anic
principle whereby Allah (SWT) advised the creatures to seek from Him for
The Comfortable life. He (SWT) says to the effect:
“…our Lord! Give us
comfortable life in this world and comfortable in the hereafter...”
6) A life insurance
policy ensures mutual cooperation, a brotherly feeling towards others, which
provides a positive status, which can provide a feeling of brotherhood in
society. For example, an assured pays
the premium, which enables the insurer to invest and make a profit while the
insurer ensures a financial protection for the assured’s beneficiary(s).
Such financial cooperation lead to a sense of brotherhood and economic
progress. Moreover, having a life
insurance policy is a positive initiative by the assured towards a positive
material status of the widow, offspring and so on. Such mutual cooperation towards a positive
goal is in fact ruled on by Allah (SWT) where He (SWT) says to
the effect:
“ …Sustain in mutual cooperation among yourselves in
righteousness and piety...”
7) Finally having a life insurance policy
is like taking an initiative towards ensuring a self-reliant society, without
facing hardship and difficulties, and, of course, an economic growth in society
which may result in the elimination of hardship and bring about a comfortable
standard of living in the society. It
is thus in line with the Qur’anic principle where Allah (SWT)
Himself prefers an easy life for the creatures rather than them having
difficulties. He (SWT) says to
the effect:
“..Allah (SWT) intends easy life for
all of you while He does not want you to be in difficulties..”
MODERN
LIFE INSURANCE Vs. FAMILY TAKĀFUL
The purpose of
scrutinizing is to discover the basic contrast between the conventional system
of life insurance and the Islamic model of it. This is because some ‘Ulamā
and many Muslims are of the impression that a life insurance is totally
prohibited in Islam. The argument has
been raised from the scenario of life insurance policy practiced under the
conventional system. It is to be acknowledging
here that even though in both the conventional system as well as in Islam a
notion of life insurance policy is being designed, there are undoubtedly
several aspects whereby both systems are in conflict in both principles and
practices. I would therefore, like to
sum up the basic contrast between them which may enable us to grasp the nature
of the Islamic model of a life insurance policy as an alternative to the one
which is practiced under the conventional system. The basic contrasts are as follows:
1) A life insurance policy under the
conventional system evolves around the element of ‘Ribā’ whereas an Islamic model of life
insurance policy is totally free from the elements of ‘Ribā’
for it is operated based on the principle of ‘al-Mudhārabah
financing
technique.
2) In a conventional system of life
insurance policy, the nominee(s) is an absolute beneficiary(s). Suffian J. in Re Man bin Mihat,
gave a verdict that, the nominee(s) inter alia in a life insurance
policy takes absolutely and exclusively the benefits of the policy. In contrast, the nominee(s) in a life policy
under the Islamic model is not an absolute beneficiary(s) but a mere trustee
who is in a position to receive the benefit over the policy on behalf of the
assured’s heirs and distribute it among them according to the
principles of ‘Mīrath (inheritance) and
‘Wasiyyah’ (bequest). In Karim v. Hanifa
the High Court of Karachi ruled out that the nominee(s) in a life insurance
policy is nothing more than a mere agent. The National Council of Muslim Religious
Affairs in Malaysia, also issued a fatwa to the same effect in 1979,
that the nominee(s) in a life insurance is a mere trustee who is supposed to
receive the benefit over the policy and distribute it among the heirs of the as
according to the principles of ‘Mīrath’ and ‘Wasiyyah’.
3) Idea of a conventional designed life
insurance policy is that, if the assured dies at any time before the maturity
of the policy, the nominee(s) is entitled to maturity of the policy the
nominee(s) is entitled to recover from the insurer the whole amount agreed in
the policy, while if the assured is till alive life upon the expiry of the
policy period he is also entitled for the whole amount agreed in the policy
plus the interest, dividends and bonus subject to the company’s
policy. On the contrary, in the paradigm
of an Islamic Model of life insurance policy is that if the assured dies at any
time before the policy matured the beneficiary(s) is entitled from the
insurance company to the whole amount of paid premiums, the bonus and dividends
according to the company’s policy, a share of profits
made over the paid-premiums plus a donation from the company’s
charitable fund according to the financial status of the beneficiary(s) (i.e.
if the beneficiary(s) is financially in good condition the amount will be
small but if the beneficiary(s) is
financially weak or unstable the amount could be bigger). Such transaction is considered as a mutual
cooperation towards the welfare of the helpless people in society, and is thus
in line with the Qur’anic principle.
Allah (SWT) says to the effect:
“…Cooperate among yourselves in righteousness and piety...”
However, in the
case where the assured’s is still alive upon the
expiry of the maturity period, he is entitled from the company the whole amount
of paid-premiums, a share of profit made over the paid-premiums according to
the principle of ‘al-Mudhārabah’, bonus
and dividends according to the company’s policy.
4) In the operation of a life insurance
policy under the conventional system, the payments for the agents are to be
paid out of the assured’s paid-premiums, whereas
under the Islamic model of a life insurance policy, the agents work for the
company and thus the company itself should pay them. This means that the payment for the agents
could include a share of profits made over the paid premiums, plus dividends
and bonus according to the company’s policy.
5) With regard to the insurable interest under
the conventional system, it is usually vested to the policyholder himself
should he be alive upon the expiry of the policy period. But, in the case of the death of the assured
within the period, the insurable interest is to be vested to husband and wife,
parents or children, the benefactor or beneficiary or servant, company and
director, trustee and employee, partners, mortgagor and mortgagee.
In contrast, under
the Islamic model, the insurable interest is to be vested to the assured
himself or to his heirs according to the principles of ‘Mīrath’ and ‘Wasiyyah’.
UNDERLYING PRINCIPLES AFFECTING LIFE INSURANCE UNDER
SHARĪ’AH DISCIPLINE
It has obviously
been established from the earlier discussion that a life insurance policy under
the Islamic model is different from the one practiced under the conventional
system. Here I wish to propose the
following basic governing principles for the Islamic model of life insurance.
1) Prior to entering into a life insurance
agreement, the assured must have a sincere intention that the policy will not
lead to gain but should look towards protection of off-springs, wife and the
other dependants from unexpected future financial risk. Simultaneously, he also has to put his trust
in Allah (SWT) for the betterment of those dependents’ future
lives. Such initiatives thus in line
with the advice of the Holy Prophet (SAW):
"The Holy
Prophet (SAW) told a bedouin Arab who left his camel untied trusting to the
Will of Allah (SWT): Tie the camel first
then leave it to Allah (SWT).”
2) The life insurance policy should not be
involved with ‘ribā’
but based on the principles of the ‘al-Mudhārabah’
financing technique, whereby the insurer as well as the assured or his
beneficiaries share the profits, bonus and dividends accordingly.
3) In the case of the assured’s
death at any time during the policy period, the beneficiary(s) of the assured
should not fight for the whole amount but only for the paid-premiums, a share
of profits made over the paid-premiums, bonus and dividends accordingly, plus a
donation from the company’s charitable fund according
to the beneficiary(s) financial condition.
4) In case where the assured is alive life
upon the expiry of the policy period, the assured can only claim from the
company the paid-premiums, a share of profits
made over the paid premiums, plus bonus and dividends according to the company’s
policy.
5) The nominee(s) in a life insurance
policy does not necessarily have to be an absolute beneficiary(s) but a mere
trustee who is under a duty to receive the benefits from the insurer and
distribute them among the heirs of the assured according to the principles of ‘Mīrath’ and
‘Wasiyyah’. Hence, should the
nominee(s) fall into the category of heirs of the assured he/she is also
entitled to a share accordingly.
6) The agents in a life insurance policy
should not be paid out of the paid premiums by the assured but be paid out of
the share of the profit made over the paid premiums by the company itself. This is because the agents are not working
for the assured but for the company.
Therefore, the agents should enjoy a share (a salary) of the profits
according to the company’s policy.
7) As regards the investment of the paid
premiums, Adil Salahi suggested that the company (insurer) is under an
obligation to invest the paid premiums in a lawful business which is free from
the elements of ‘Ribā’,’ gambling’ and other forms of unlawful transactions, contrary to
divine principles.
8) The insurable interest in a life policy
should be presented either to the assured himself (should he be alive upon the
expiry of the policy period) or to the heirs of the assured (should the assured
die at any time within the policy period) according to t he principles of ‘Mīrath and ‘Wasiyyah’.
MISCONCEPTIONS
AGAINST THE VALIDITY OF LIFE INSURANCE
Some Islamic
scholars oppose the idea of contract of life insurance generally. They argue that, a life insurance contract is
contrary to the Divine principles and thus, is not permissible in Islam. There are another group of ‘Ulamā
who agreed to the general insurance with certain conditions but they opposed
the application of life insurance policy. In this section, an attempt is made to
highlight the opposing views of the ‘Ulamā against the
validity of life insurance in today’s society and
possible refutation to it.
Opposing Views
among the ‘Ulama
Among the
opponents against the validity of life insurance are Mufti Mohd. Bakhit, Mohd.
Abu Zuhra, Mohd. Musa, Ahmad Ibrahim, Al- Hanafi, Ibd Abdeen, Sheikh Shaukat,
Khan Mohd. Yusuf Musa, Shaukat Alyan, Ahmad Fahmi, Ahmad Taha Sanusi, Abdur
Rahman Isa, Ali Khaleef and a few others including Al-Sheikh Jad Al-Haq Ali Jad
Al-Haq who vehemently oppose the idea as well as the operating of life
insurance policy in the light of the divine sanctions. In their judgement life insurance is
absolutely opposed to the Shari’ah discipline and thus shall not be
permissible in Islamic teachings.
Grounds for the
Opposing Views
The grounds for
opposing the validity of life insurance are in fact based on many reasons. Here, I would like to sum up some of the
principal grounds upon which the ‘Ulamā and many Muslims
are reluctant to accept a life insurance policy under the shield of Islamic
teachings. Their arguments rely on the
following grounds:
1) It is a policy of insuring one’s
life. Sheikh Jad al-Haq issued a ‘Fatwa’ against the validity of life insurance because it is a
transaction, which ensures one’s life, and insuring one’s life by a
creature is not permissible in the Shari’ah.
2) A life insurance contract involves
unlawful elements. A contract, which
involves unlawful elements, can never be binding as the Holy Prophet (SAW) says
to the effect:
“..the Muslims are bound by the
conditions except the condition which prohibits the permitted one or the one
which permits the prohibited one.”
3) It contains the element of ‘Riba’. Many ‘Ulama oppose the validity of
life insurance because it involves the elements of both kinds of ‘ribā’ i.e. ‘riba al-Fadhl’ and ‘ribā al-Nasiah’. For example, if the insurer pays the insured
or his beneficiary(s) in return of paid premiums more than what he paid, it
becomes ‘ribā
al-fadhl’,
while the payments by the insurer to the assured after a particular period of
time becomes ‘ribā
al-Nasiah’. Thus both situations make a life insurance
policy unlawful. This is because, any transaction involving ‘riba’ does not have shelter in the Islamic Shari’a as Allah (SWT) declared to the effect:
“… Allāh (SWT) permitted trade while
prohibited ribā...”
4) It supersedes the Will of Allah
(SWT). In a life insurance policy,
from the commencement of the contract between the insurer and the assured, the assured
always aims that upon his death, his beneficiary(s) would gain a large amount
of money. In such a situation the
assured predetermines his own death as well as confirming the material gain for
his beneficiary(s) whereas, Allah SWT) is the one who determines one’s
death as well as future earnings. Allah
(SWT) reminds us to the effect:
“.. Nor does anyone know what it is
that he will earn on the morrow, nor does anyone know in what land he is to
die, verily Allāh
(SWT) has full knowledge and He is acquainted (with all things).”
5) It contains an element of betting. In a
betting the gambler always hopes for a chance to gain. Similarly, in a life insurance policy the
assured upon the payment of premiums to the insurer always hopes for a change of
gaining a large amount of money. Hoping
for such a chance is similar to gambling and thus ‘Sharī’ah’ never
recognizes it as a valid transaction.
6. It has element of ‘al-Gharar’ (uncertainty). Any
contract whose subject matter or the object involves ‘al-Gharar’ (uncertainty) the contract deemed to be null and void ab
initio. In a life insurance contract
the subject matter is a death and it is not certain whether the assured’s
death will occur during the policy period or not. Thus, such uncertainty in the life insurance
policy leads the policy to be invalid.
Moreover, a transaction involves ‘al-Gharar’ is
prohibited in the Islamic discipline as the Hadīth to this effect:
“The
Holy Prophet (SAW) forbade the transaction through fraudulent means or the
Gharar Sale.”
7) It contains the element of Maisir (gambling). In a gambling the
gambler pays a certain amount of money and subsequently hopes for a chance to
gain an additional large amount of money. Any transaction involving such element of gambling is
prohibited in the Shari’ah, as Allah
(SWT) says to the effect:
“…They ask thee concerning wine and gambling say in the them is
great sin...”
Similarly, in a
life insurance policy the assured always hope for a chance to gain which is in
the same nature as gambling and thus is prohibited in the Islamic ‘Sharī’ah.
8) There is no direct authority, which
justifies life insurance. There are some
who do not accept the life insurance policy as a valid transaction. They claim that a life insurance policy is a
transaction, which cannot be, justified by the injunctions from either the ‘Qur’an’ or
the ‘Sunnah’.
9) It is contrary to the principles of ‘Tawakkul’ (placing the trust in Allah (SWT). It is a fundamental obligation on believers,
in conformity with their faith, to place their trust always on the Al-Mighty Allāah
(SWT). As Allah (SWT)
commanded to the effect:
“….but on Allāh (SWT) ‘Tawakkul’ (put your trust) if you have faith’.
In a life insurance
policy once the assured enters into an agreement and pays regular premiums
while he hope that one day he will die and the insurer will protect his
beneficiary(s) financially. In this
case, the assured puts his trust not in Allah (SWT) but on the insurer
which is contrary to the Qur’anic principles of ‘Tawakkul’ and
therefore a life insurance policy should be deemed to be unlawful.
10) It is contrary to the principles of ‘al- Mīrath’ and ‘al-Wasiyyah’. It is a divine principle both Mīrath and Wasiyah
that one’s property and wealth upon death are, inter alia,
to be distributed according to the principles of ‘Mīrath’ and ‘Wasiyyah’. In the light of these principles the deceased
has no jurisdiction to determine the beneficiary(s) upon his death. In a life insurance policy however, the
assured nominates the beneficiary(s) who are expected to enjoy the benefits of
the policy. It seems that the assured
determines the beneficiary(s). Thus it
is contrary to the principles of ‘mīrath’ (inheritance) and
‘Wasiyyah’ (bequest).
Recent
fatwa by Shaikh Al-Azhar.
Sheikh
al-Azhar, Al-Shaikh Jad-al-Haq Ali Jad al-Haq, responded in a fatwa’ session on the position of life
insurance in Islamic Shari’ah which has appeared in ‘al-Iqtisadul Islami’ July
1995, in the Fatwa column, at
60. In his Fatwa he established
that a life insurance policy is prohibited in Islamic Sharī’ah. His claim was based on the following grounds:
1) In the light of the principles of
Islamic Shari’ah no one could ensure others’ wealth or property unless there is a fear of unjust enrichment,
losses or destruction. In a life
insurance policy these three circumstances are not available; moreover, a life
insurance policy involves the element of Ribā
and
therefore it is not allowed in Islam.
2) Life insurance is a policy which
insurers one’s life and thus it is not
permissible in Islam.
3) A life insurance policy involves the
element of al-Gharar (uncertainty). A transaction, which involves Gharar,
is not valid in the eyes of the Islamic Sharī’ah and therefore a
life insurance is unlawful.
4) Moreover, he went on to prolong his
discussion by arguing that, a life insurance contract evolves not around mutual
cooperation but unlawful elements and thus if a contract evolves around such
elements it is null and void
relating on the following Hadīth:
“..Muslims are bound by the conditions except the of conditions
which prohibit the permitted one or the one which permits the prohibited one.”
5) Finally, he advised Muslims that
Muslims should get involved in a life insurance policy because anyone who
obtains money from such a policy is Haram.
RESPONSE
TO THE MISCONCEPTIONS
There are
differences of grounds relying on the divine authorities, authenticities and
analytical approaches, put forward by distinguished Islamic scholars in
opposing the operation of life insurance policy in the light of Sharī’ah discipline. I sincerely believe that if those scholars could
spend some time deeply concentrating on the issue of life insurance policies
without looking at the nature of how the conventional system operates but
consider the material risk of unfortunate orphans, widows and other dependents
who may unexpectedly loss their bread winner, then surely they could come up
with an alternative Islamic model of life insurance justified by the divine
sanctions, which may protect these vulnerable persons from unexpected future
material risks and ensure the elimination of poverty in
society while guaranteeing an economic growth in the Muslim Ummah. In this part of the article, I would like to
respond to the views put forward by the opponents against the validity of life
insurance policies, which will enable us to understand the actual scenario of a
life insurance policy under Islamic teaching, and be able to distinguish a life
insurance policy under Islamic teaching from one which is operated under the
conventional system.
Response to Opponents in General
1) Getting involve with a life insurance
policy does not mean that one is insurance one’s own life, but it
is mere financial transaction based on the principles of al-Mudhārabah relying on the Qur’anic
doctrine of mutual cooperation,
in taking an initiative towards rescuing orphans, widows, and other dependents
of the deceased from an unpredicted future material risk. In a life policy the insurer and the assured
equally believe prior to entering into the agreement that every creature is
subject to his own death, and thus the assured will surely meet his death. In other words, a life insurance policy means
an initiative to provide financial security for the orphans and so on, which
has nothing to do with insuring one’s own life as
claimed by some. Moreover, an initiative is like ensuring the
future welfare of the off-springs (orphans), widows, and dependents, and it is
highly justified by the Islamic doctrine of the following Ahādith as the Holy
Prophet (SAW) stated to the effect:
“Narrated
by Saad bin Abi Waqqas (r.a)… the Holy Prophet (SAW) said… it is better for you to leave
your off-spring wealthy than to leave them poor, asking others for
help..”
“Narrated
by Saffwan bin Salim (r.a ) the Holy Prophet (SAW) said the one who looks after
and works for a widow and for a poor person is like a warrior fighting for
Allah’s
cause or…. Fasts during the day and pray
through out the night”
Relying on the
above justifications, it could be stated here that a life insurance policy does
not mean to insure one’s own life, but it is a great
contribution towards the future welfare of orphans, widows and other
dependents.
2) A life insurance contract does not
involve unlawful elements like al-Gharar, ribā,
or gambling as claimed by some. It is a lawful financial transaction whose
subject matter is the assured’s death which is
not uncertain (al-Gharar) or the assured doe not hope for a chance (like
gambling) but he is taking an initiative for the future welfare of the orphans,
widows and so on, or it is a financial dealing based on the principles of al-Mudhārabah financing
technique whereby the parties involved share the profits over the paid-premiums
and do not get the interest which is different from the one under the
conventional system on interest (which is Ribā-based). However, since the life insurance contract
does not involve these unlawful elements, it is thus lawful and binding because
the Holy Prophet (SAW) said:
“Muslims
are bound by their contract except the one which prohibits the permitted one
and vice versa.”
3) A life insurance policy does not
involve an element of Ribā as claimed by
some ‘Ulamā but it is a
financial transaction which is in line with the principles of mutual
cooperation, which is based on the principle of the al-Mudhārabah financing
technique whereby both the insurer and the assured enjoy the share of profits
made over the paid-premiums plus dividend bonus as well as an amount of
donation which is subject to the financial condition of the assured’s
beneficiary(s). Thus, such transaction
of mutual cooperation is in line with the Qur’anic principle, where Allah
(SWT) commanded to the effect:
“..Cooperate ye one another in
righteousness and piety..”
4) A life insurance policy does not
supersede the Will of Allah (SWT) nor is it contrary to the principles
of Taqdir (fate), as some argue that the assured in a life insurance
policy determines his own death, whilst ensuring a future financial gain for
his beneficiary(s), and meanwhile places his trust in the insurer for the
financial protection of his beneficiary(s).
These situations overrule the power of Allah (SWT). In responding to this arguments, in a life
insurance policy the assured believes that he will surely die, which does not
mean that he determines his own death, and such a believe is in line with the Qur’anic
injunction:
“Every soul shall have a taste of
death..
The assured in a
life policy does not determine the future financial condition of his beneficiary(s),
but he takes an initiative towards rescuing his off-spring and so on from
future material risk, it is also in line with the tradition of the Holy
Prophet (SAW) said:
“Whosoever
takes an initiative to alleviate one’s (inter alia material) difficulties,
Allah (SWT) will lighten his difficulties in the world and the next…"
Moreover, the
assured does not place his trust in the insurer to protect his beneficiary(s)
materially but he is in financial agreement with the insurer for a mutual cooperation
to look after the future welfare of his beneficiary(s), and it is no doubt
justified by the Qur’anic principle of mutual cooperation:
“…Cooperate ye one another in righteousness and piety...”
5) A life insurance policy does not
involve elements of betting. Mustafa
Al-Zarqa opined that in a bet the person always hopes for a chance and
there is no element of cooperation in it,
rather it is some sort of competition.
In contrast, a life insurance policy is based on the principle of
cooperation
in which the assured never hopes for a chance but works for the welfare of
orphans, widows and other dependents which is in line with the saying of the Holy
Prophet (SAW).
6) A life insurance policy does not evolve
around the element of gambling because a life insurance policy is for the
purpose of the material welfare of orphans, widows and other dependents,
whereas gambling is a game of chance whereby the gambler always hopes to gain. Therefore, a life insurance policy is
contrary to gambling. Al-Dareer
acknowledged that in the insurance policy there is safety against danger
whereas gambling creates danger, so how could an insurance policy be equal to
gambling?
7) There is no element of uncertainty (Gharar) in a life insurance policy because in a life
insurance policy, the subject matter is the death of the assured; the
assured believes that he will die one
day as ordained in the Holy Qur’an, and thus it is not uncertain (Gharar). Moreover, sharing profits over the
paid-premiums are also not uncertain (Gharar) because a life insurance
policy is based on the principles of al-Mudhārabah, whereby if the
assured dies within the policy period, the beneficiary(s) will get the benefits
according to the principles of al-Mudhārabah. But, if the assured is still alive upon the
expiry of the policy period, he is also entitled to the claim according to the
principles of al-Mudhārabah. In all these situations, the subject matter,
the object and consideration (premiums) of the transaction are clear and not
uncertain (Gharar).
8) Even though there is no express
authorities from the Qur’an or Sunnah highlighting the life
insurance policy there are a number of authorities from the Qur’an and Sunnah
which impliedly justify a model of life insurance policy for the Muslim Ummah
which is quite different from the one operated under the conventional
system. For example, a life insurance
policy is based on the principle of mutual cooperation, is justified by the Qur’anic
injunction at 5:2, it is operated based on the principle al-Mudhārabah financing
technique which is justified by the Sunnah of the Holy Prophet (SAW)
and there are many other authorities and authenticities which justify different
aspects of life insurance policies as mentioned earlier.
9) Some argue that a life insurance policy
is contrary to the principles of Tawakkul (placing trust in Allah
(SWT)) because in a life insurance
policy, the assured puts his trust not
in Allah (SWT) but in the insurer who is expected to protect the
beneficiary(s) financially. Responding
to this argument, I would like to point out here that a life insurance policy
is not contrary to the principle of Tawakkul, but it is a policy whereby the insured takes an
initiative for the welfare of his
off-springs and so on, in which he mutually agrees with the insurer that the
insurer will undertake to provide a material assistance in consideration of the
paid-premiums. The assured
simultaneously places his trust in Allah (SWT) for the betterment of his
beneficiaries’
future life. Thus the assured does not
Tawakkul on the insurer but on Allāh (SWT). It is
in line with the saying of the Holy Prophet (SAW):
The
Holy Prophet (SAW) told a bedouin Arab who left his camel untied trusting to
the will of Allah (SWT): Tie the camel
first then leave it to (put your trust on) Allah (SWT)”
10)
A life insurance policy is
not contrary to the principles of Mīrath (inheritance) and
Wasiyah (bequest). In a life insurance policy the assured
nominates a particular person(s) as a nominee(s) who is nothing more than a
trustee,
who is under a responsibility to receive the benefits over the policy on behalf
of the heirs of the assured
and distribute them amongst them according to the principles of al- Mīrath and Wasiyyah. Hence, the nominee(s) is entitled only to a
portion of the benefits over the policy if he/she falls under the category
of heirs of the assured.
Analyzing
the Recent Fatwa of Sheikh Al-Azhar
Sheikh
Al-Azhar al-Sheikh Jad al-Haq Ali Jad al-Haq has submitted in a Fatwa
session recently that a life insurance policy is in the light of Shari’ah
unlawful (haram). His claim for
such a decision was based on a few grounds (as mentioned earlier). In this part of the article, I would like to
respond to the grounds that the honorable Sheikh has put forward as a
basis for opposing the validity of life insurance policies as follows:
1) In the Sharī’ah discipline no one
has the right to insure the others’ property unless there is a fear of unjust enrichment, losses or
destruction. In a life insurance policy
the insurer insures a benefit over the paid-premiums (by the assured), for the
welfare of the beneficiary(s) of the assured, for an unexpected event, the
assured’s death (loss of life) and also for the fear of the loss
of the beneficiary’s(s) material stability upon
the death of the assured. In all
situations the life insurance policy contains an element of loss. Abu Jaib has pointed out that an
insurance policy is a compensation for any loss incurred by the insured and it
is neither a profit nor a gain like in betting. Hence a life insurance policy is not contrary
to the Sharī’ah discipline.
2) A life insurance policy does not
involve elements of Ribā but it is a
financial transaction based on the principle of al-Mudhārabah financial
technique relying on the principles of mutual cooperation which is justified by
the Qur’anic sanction. Allāh
(SWT)
says to the effect:
“…Cooperate ye one another in righteousness and piety...”
3) A life insurance policy does not
involve insuring one’s own life but it is a mutual
financial transaction towards the welfare of orphans, widows and other
dependents. Such an initiative is in
fact well justified by the sayings of the Holy Prophet (SAW). He (SAW) however said to the
effect in the following Ahādith:
“Narrated by Sahal bin Sa’ad (R ) the Holy Prophet
(SAW) said: I and the person who looks
after an orphan and provides for him will be in paradise..”
“Narby
Abu Huraira (r.a) the Holy Prophet (SAW) said… whosoever takes an initiative
(towards the welfare of) one’s inter alia financial
difficulties, Allah (SWT) will lighten his difficulties in this world and in
the hereafter.”
“Narrated
by Safwan bin Salim (r.a) the Holy Prophet (SAW) said : the one who looks after
and works for a widow and for a poor person is like a warrior fighting for the
cause of Allah (SWT) of like a person who fasts during the day and pray through
out the night”
“Narrated by
Saad bin Abi Waqqas (r.a)… the Holy Prophet (SAW) said… it is better for you to leave
your off-spring wealthy than to leave them poor, asking others for
help..”
4) A life insurance policy does not
contain any element of al-Gharar (uncertainty). The assured believes that the subject matter
of life insurance is his death which is certain and not Gharar, moreover,
the benefit over the policy in consideration of paid-premiums is also available
which is certain according to the principle of al-Mudhārabah and thus there is
no element of Gharar in it.
Hence, a misconception against a life insurance policy involves an
element of gharar is very refutable.
5) A life insurance contract to involves
unlawful elements like Gharar, gambling, Ribā,
etc. which make the contract unlawful as claimed by Shaikh al-Azhar But it is a mutual financial contract which
is free from the above unlawful elements (as proved in the earlier discussion)
and therefore, it is binding as justified by the saying of the Holy Prophet
(SAW):
“Muslims
are bound by their contract except the one which prohibits the permitted one or
permits the prohibited one…….”
Based on these
responses, I would like to humbly remark that the idea that Shaikh al-Azhar
put forward in conclusion of his Fatwa, advising Muslim Ummah not
to engage in a life insurance policy because it is Haram (unlawful)
should be rebutable. I sincerely expect
that Muslim Ummah should not be confused but would clearly understand the
concept that life insurance is valid if applied accordingly and benefits can be
rightly gained from it.
URTHER
GROUNDS FOR JUSTIFICATION IN THE LIGHT OF SHARI’AH AUTHORITIES AND
AUTHENTICITIES
From the earlier debates
and justifications based on various authorities and authenticities, it has been
quite clear that a life insurance policy designed under the Islamic model is an
alternative solution to a conventional life insurance policy for the
contemporary Muslim Ummah.
Nevertheless, I would also like to present a few other grounds here to
justify the idea that a life insurance policy is not permissible for the
purpose of luxury but it is permissible and encouraged by Muslim Ummah for
necessity, in order to ensure economic growth and stability among Muslim Ummah
of today. Further grounds for the
justification of a life insurance policy are as follows:
1) A life insurance policy is similar to a
contract of al-Wadiah (deposit) whereby two parties in a financial transaction
engage in an agreement that one party deposits money as an Amānah
(trust)
to the other party to be kept for the purpose of safety. A Wadiah is justified by the Qur’anic
injunction where Allah (SWT) commanded people to fulfill the trust (of, inter
alia, Wadiah). Allāh
(SWT) ordains
to the effect:
“Allah (SWT) commands you to
render back your trusts to those to whom they are due..”
2) A life policy is a financial
transaction which had been dealt with by the people before Islam under the
doctrine of ‘al-Aqilah as a ‘Urf (custom) which had been accepted by the Holy Prophet
(SAW) whereby the people of every tribe used to deposit money for a certain
amount in order to pay blood money as a compensation on behalf of the killer of
their own tribe to the heirs of the victim of other tribe. Such ‘Urf (custom) was deemed to bring benefit to
society. A custom, which is beneficial
to society, is permissible in Islam as justified by the saying of the Holy
Prophet (SAW):
“Whatever
Muslims see good, it is good in the eyes of Allah (SWT)”
life insurance
policy is based on the sanction of mutual cooperation so as the doctrine of al-‘Aqila
practice was also based on mutual cooperation, therefore, Zarqa and Alwan
accepted the idea that there is enormous similarity between insurance and al-‘Aqila
in the sense of cooperation.
3) Every transaction is originally
acceptable, unless it involves unlawful elements. Relying on this principle, it is admitted
here that in a life insurance policy the elements contained are in line with
the Sharī’ah principles (the
life insurance policy which is based on the Islamic model), and therefore it is
undoubtedly lawful.
4) A life insurance policy is for the
purpose of sustaining public interest.
For example, the purpose of a life insurance policy is to protect the
orphans, widows, and other dependents of the assured from future material risk
and thus, it is a transaction to be justified by the doctrine of Masaleh
al-Mursalah (public interest). A
transaction which is in the public interest is lawful, because it eliminates
hardship and assists a comfortable life for human beings which in line with the
Qur’anic injunction:
“...Allāh
(SWT) intends every facilities (inter alia comfortable life) for you; He does
not want to put you to difficulties...”
5) A life insurance is not a gain or
hoping for a chance, but it is a policy for providing compensation for damage
or loss. This is because the policy is
an agreement between the insurer and the assured that, once the assured dies
within the policy period, the insurer will pay an amount of money in
consideration of paid-premiums to the beneficiary(s) of the assured. Such a payment is like a compensation for the
loss of opportunity of future earning by the breadwinner (assured) due to his
death. To provide such compensation is
like a mutual cooperation, which is commanded by Allah (SWT).
"... Cooperate one another in righteousness and piety...”
6)
A life insurance policy is similar
to a retirement pension scheme. Al-Zarqa
and al-Alwan apparently discovered that all contemporary scholars agreed
on the validity of retirement pension scheme. Adil Salahi similarly acknowledged
that
“All scholars and
seats of Islamic learning approved of the concept of pension because it gives
the subscriber security for himself and his Family in the difficult
circumstances of his leaving work or in case of death.”
Salahi relying on his
acknowledgement poses the question:
“Why should Family security be lawful in one
system and not in the other when the method of operation is practically the
same?
Relying on the above justifications it is
admitted here that life insurance is like a retirement pension scheme (which had
been widely introduced during the period of Sayiidana Omar (r.a)
therefore, it is not unlawful transaction.
7) A life insurance policy is also
justified based on the principle of necessity (Darurah). For example, it is an important task for the
guardian to work for the welfare of his own dependents. It is in line with the tradition of the Holy
Prophet (SAW) where he said to the effect:
“...It is better for you to leave
your off-spring wealthy than to leave them poor, asking others for
help...”
It is also to be
noted here that in the case of necessity that which is prohibited is also to be
permitted in the Islamic discipline as Ibn Nawjeem stated in his book al-Ashbah
Wa al-Nazaira,
“Necessity permits an unlawful act.”
A life insurance
policy of course does not allow for an unlawful transaction, but why not, the
principle of necessity allows it to be permissible.
8) A life insurance contract is a binding
promise. In the light of Islamic jurisprudence,
a promise either unilateral or bilateral, is in both situations binding as
ordained in the Holy Qur’an:
“O
ye who believe? Fulfill all agreements”
According to Imam
Malik (r.a), the founder of the Maliki
School of law, every
binding promise is lawful, therefore, every insurance contract contains a
binding promise and thus it is lawful.
In other words, in a life insurance contract, there is an agreement
between the assured and the insurer which is a binding promise towards the
protection of widows, orphans and so on, from future material risk, and
therefore such a binding promise makes a insurance contract valid.
9) A life insurance contract evolves
elements of donation. This is because
the assured pays regular premiums for the protection of his (beneficiary(s);
such payments of premium is like a donation for helpless people. Moreover, once the insurer pays an amount of
money together with an additional amount from the charitable fund to the beneficiary(s)
of the assured in consideration of the paid premiums this also involves element
of donation. A donation is lawful in the
Islamic jurisprudence as justified by the practices of the Prophet (SAW):
“The Prophet (SAW) used to accept
presents (donation)”
Relying on the above authenticity, it is
analytically admitted here that a life insurance policy does involve elements
of donation and therefore, such a policy is to be held lawful in the eyes of
the Islamic discipline
FINAL SUBMISSION
Analysis concludes
that convention and Islam design different models of life insurance
policies. There are many similarities in
both systems but both also diversify. In
conclusion, I would like to summarize where the conventional and Islamic model
are in contrast. Finally, I wish to
express a hope for the future application of the Islamic life insurance
policy. To summarize the results of the
research:
1) A life insurance policy under the
Islamic model is a different one from the one, which is operated under the
conventional system. A life insurance
policy under the conventional system involves, inter alia, Ribā
opposed to the principles of Mīrath and Wasiyah,
payments of agents to be out of the paid premiums, etc. In contrast, a life insurance policy under
the Islamic model is like a pension scheme, which is operated based on the
principles of the al Mudhārabah financing
techniques, does not clash with the principles of Mīrath and Wasiyah,
as highlighted earlier, and also the payments for the agents to be paid by the
insurer out of the profit made over the paid premiums.
2. The insurable interest in life under the
conventional system is to be vested to those who are not necessarily to be the
heirs of the assured. In contrast, an
insurable interest in life under the Islamic model should be vested to only
those who are entitled to the property of the assured according to the
principles of Mīrath and Wasiyah.
3. The nominee(s) under the conventional
system is an absolute beneficiary over the policy, whereas the nominee(s) under
the Islamic model of a life insurance policy is nothing more than a trustee(s)
who is responsible for receiving the benefits over the policy and distributing
them among the heirs of the assured according to the principles of Mīrath and Wasiyah.
Analysis throughout the
research and the summary show that a life insurance policy under the Islamic
model is different from the one which is operated under the conventional
system. Hence, I would like to extend my
humble request to the respectable Ulamā, who oppose a
life insurance policy generally, that they could oppose the conventional life
insurance but not the one, which is designed under the Islamic model. It is my sincere hope that this article might
enable the Muslim Ummah to have no further doubt on the application of
an Islamic life insurance policy.
Islamic scholars could come up with a better model as an alternative to
the existing life insurance operated under the conventional system for the
noble purpose of ensuring further economic growth in contemporary Muslim
society.
Prof. Dr. Mohd. Ma’sum Billah
www.drmasumbillah.blogspot.com
