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  • Writer's pictureAhsan Malyk

Is Life Insurance Haram?

An individual and a life insurance company enter into a contract for life insurance. The insurance firm agrees to give your dependents a lump sum upon your passing, in return for paying ongoing premiums. Due to the abundance of online information, selecting life insurance policies can be challenging.

Comparing and selecting a life insurance plan for Muslims requires more thought to be given to insurance options that follow Islam and Sharia rules and principles. Life insurance aims to safeguard your loved ones, estate, and other vital interests after passing.

Payouts from life insurance offer dependents and family members a crucial benefit. The life insurance policy is more of a financial transaction that shields the surviving family members of the deceased from unforeseen financial danger in the future than insuring the insured's life.

Although life insurance is not strictly forbidden in Islam, a few things Muslims seeking Islamic-focused insurance products should keep in mind.


Life insurance is not viewed as in conflict with any Islamic rules or values in Islam. The availability and acceptance of Islamic banking and financial services in developing countries, which include Sharia and Islam compliance goods such as Islamic mortgages, life insurance policies, and Sharia-compliant financing choices, have dramatically increased over the past few decades.

Mortgage loans have grown in popularity among those searching for institutions that provide financial services that do not violate any Islamic values. Islamic law has traditionally regarded conventional mortgage loans with their interest (riba) components as being prohibited.

Although the majority of life insurance policies do not include interest payments, there have been some concerns expressed about the legality of life insurance, especially when there is a risk factor involved.

Depending on the type of life insurance policy you are dealing with, you can determine whether it is considered halal in Islam.


There are several different kinds of life insurance policies on the market. We will concentrate on two of the most typical life insurance policy kinds, though.


This life insurance coverage expires the day after the covered person passes away. Whole life insurance contracts provide a payout to the insured's family during their demise.

The owners of these kinds of insurance policies continue to offer lifelong protection. Life assurance is another name for whole life insurance. In essence, it works to ensure that your family is financially secure after your death. The amount that will be paid out is inevitable, but you must continue making premium payments over time.

Compared to term insurance, whole life insurance is significantly more expensive.


Term insurance plans are regarded as defensive insurance plans. These insurance policies safeguard you for a set period of time while paying for things like mortgage bills and lost income in the event of the insured's death.

One instance of a term insurance policy is when a person turns 30 and purchases a £20 per month term insurance policy. If you pass away before age 50, the policy's terms stipulate that £100,000 will be paid to your beneficiaries. The policy expires, and the insurer is not required to make any payments if you do not pass away before turning 50. The payment of benefits to beneficiaries is not assured (unless of course, the insured dies before they turn 50).

Life insurance and life assurance are two distinct concepts, despite the fact that they are frequently used interchangeably. Both are types of insurance that are intended to pay out money if the policyholder dies. However, when you contrast the two, it is evident that life insurance relates to a set term whereas life assurance covers the insured's entire life.


Many experts concur that when takaful principles are applied to insurance, then it is regarded as being allowed Islamically when it comes to life insurance coverage. Takaful is a type of insurance that complies with the rules of Sharia law and essentially entails the pooling and investment of money.

Islamic insurance that is founded on cooperative, mutual, joint interests, indemnity/debt, solidarity, and shared interests is known as takaful.

Takaful policyholders are regarded as joint investors with the insurance providers. The pooled funds and any losses are split between the vendors and the policyholders. There is no assurance that an investment will provide a profit, and there are no certain fixed gains.

Muslims seeking life insurance policies and goods that comply with Islamic law and the Sharia must make sure that the policies they purchase do not include the following clauses:

  • Any doubt that might be of interest

  • Hazard-laden confusing terms

  • Gambling

All of these are forbidden in Islam.

The fundamental idea behind takaful is that a group of people pool their money in a way that doesn't make a profit but instead benefits everyone in the group.

Takaful is about cooperative and altruistic endeavours.

Islam's takaful guidelines can be summed up as follows: Cooperating on losses and liabilities reduced or eliminated shared uncertainty

No party has an advantage over another.

The idea of insurance in Islam is founded on takaful, a sort of social solidarity. The takaful is founded on cooperative ideals and trustees who uphold the rights of each person whose finances have been pooled. Muslims seeking life insurance coverage should opt for products built on the takaful philosophy.

Takaful life insurance is considered halal and offers financial security in addition to long-term savings.


Muslims looking for insurance plans that adhere to Islam and Sharia regulations for financial services and products must ensure that the insurance products they invest in do not contain uncertainty, risk, or interest.

Make sure to conduct due diligence on the contractual terms of the plans and compare and contrast them before choosing one if you're searching for insurance policies that don't go against any Sharia or Islamic values.

Given that takaful is known to be considered halal in Islam, any insurance policy that abides by the takaful precepts ought to be seen as being permissible as well. You should look to transfer to a policy that is more Sharia compliant if you have a policy with insurers who invest the money and the investment is in sectors considered haram by Islam (such as those connected to alcohol, gambling, pornography, etc.).


Knowing what kind of policy you have will help you determine whether it is Sharia-compliant. Is this a policy based on investments? Is money being exchanged? Is it speculative in any way? In what are the monies put to use? Exists a risk factor that could give rise to a claim against the insurance provider? These issues must be considered while looking for a Sharia-compliant insurance plan.

Most rational individuals would concur that organizing your finances and safeguarding your family from future financial risks are responsible decisions. Although it has been suggested that purchasing life insurance might encourage others to murder the insured, this is rarely the case.

Insurance policies serve as a form of protection, especially for people without significant financial resources or real estate. Whole life insurance policies and life assurance adhere to Islamic law.

Check for gharar, riba, and maysir components before acquiring any life insurance. Islamic law prohibits the use of these three notions in contracts.

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