Why Is Life Insurance Haram? 3 Important Islamic Finance Views!

Are you confused, stuck, and trying to find the answer to; why is life insurance haram? Then, let us aid in diminishing your stress. To clear up all your doubts and to educate yourself on this topic, continue reading this article. Now, this is because we’ve gathered a bunch of different viewpoints, opinions, and facts related to this topic that will help you be a lot more aware of this matter.

Before proceeding on to that, we would like to praise you for making an effort to educate yourself about the Islamic laws in a generation where most Muslims are ignorant about them. To understand the life insurance policy, just read this article thoroughly.

why is life insurance haram


What Is Life Insurance?

An agreement between such a client and an insurance provider is referred to as life insurance. In this contract, the individual makes premium payments. In return, their beneficiaries are paid a hefty sum after their death. Well, this essentially happens to ensure the financial security of the beneficiaries after the individual’s death. It is then the beneficiaries’ choice on how they want to make use of that amount. Usually, the money gets used for the following reasons :

  • To pay off the mortgage balance
  • To spend on daily needs
  • To pay college tuition fees


How Many Types Of Life Insurances Are There?

There are two types of life insurances. First, there’s the Term Life Insurance. This insurance policy guarantees you payment of a stated death benefit if you die during the term in exchange for your premiums. Secondly, there’s whole life insurance. This insurance policy is the one that you’re most probably familiar with because it is more common. Its process is simple, the one that we explained earlier in the article.


Islamic Viewpoint On The Life Insurance Policy

Why is life insurance haram? In Islam, haram means “prohibited.” Many Muslims do not register for an insurance claim. Some companies might invest their money in businesses that involve gambling, alcoholism, or entertainment, which is not allowed by their Islamic Law. To understand why life insurance is haram in Islam. We have tried to find the three root causes that are listed below:


#1. Riba And Gharar

This word means ‘usury’ or unjust. It has been mentioned several times in the Holy Quran. Moreover, it is condemned in Islam because this system enriches the richer causing injustice in the society. On the other hand, the word “Gharar” means risk, uncertainty or, chance. An Islamic dictionary (A Concise Dictionary of Islamic Terms) defines the meaning of this word as the sale of what is not present. Learn more about the terms here: “Understanding Riba and Gharar in Islamic finance.”


#2. Maysir

Maysir is gambling, and a simple definition of this would be a matter of chance. This act is strictly forbidden in Islam because it causes the participants to lose the ability to be rational. The participants of this game; cling to the mere hope of winning a lump sum of money. Often forgetting to consider the damage the possibility of loss will cause. Furthermore, it’s an addiction. Winning this game once might make one yusun.

Yusun means wishing for something valuable while not working for it.


Connecting These Causes to the Life Insurance Policy

Like we explained earlier, riba is a system due to which unjust takes place. And if we look into the terms life policy, it causes either the insurer or the insured person to earn through exploitive gains. For example:

  • A person issues a term life policy for themselves then only pays for several months and passes away during that term. However, the insurance company will still have to pay the total amount of the stated death benefit, making them give more than they earned; read ” Which of these describe a participating life insurance policy?
  • If a person gets themselves a term policy and outlives the term period while paying the premiums regularly; they won’t receive the death benefit anymore

You spend a nice chunk of your earnings for securing your family’s future and end up losing it all just because you survived

Secondly, let’s have a look at another root cause which is Maysir. Yes, we understand we can’t refer to an insurance life policy as gambling. But if you look at it, the one thing that these two have in common is the lack of certainty. When a person gambles, they’re not sure whether they’ll win or not. Yet, they choose to hang on to the smallest amount of hope.

And this is because of the increasing greed in their hearts. Risking a lot in exchange for something they don’t even know they’ll be able to attain or not. The third root cause; Gharar. Honestly, there’s not much to talk about Gharar as it shares the same principle with Maysir, which is uncertainty. However, there is a viewpoint that we would like to share with you.

Well, a lack of certainty arises when we do not have trust in our creator. So ask yourself; why do you want to trust an organization in ensuring your loved one’s financial security when you can trust your creator, the almighty. After all, it is he who has provided you with everything. And that is why insurance is haram in Islam.



We hope you got your answer to why is life insurance haram? But just because you can’t get life insurance doesn’t mean you can’t secure your family’s future. There are plenty of ways to ensure your family’s financial security. Like for instance, by doing savings and investing in real estate. On the other hand, you might want to read this one with the topic “What is a MEC life insurance policy?”Anyway, thanks for your time!

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